NEAR EAST AND SOUTH ASIA REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00289R000301240001-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 76
• Document Creation Date: December 27, 2016
• Document Release Date: January 9, 2014
• Sequence Number: 1
• Publication Date: May 9, 1986
• Content Type: REPORT

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Directorate of Sccrct
Intelligence
MASTER FILE COPY
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Near East and
South Asia Review
9 May 1986
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9 May 1986
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Near East and
South Asia Review
9 May 1986
Page
Articles
Will the Persian Gulf States Abandon Iraq's Saddam Husayn? 1
?An Alternative Analysis
The general consensus is that Gulf support for the Iraqi President
remains strong and that the cautious Gulf leaders are unlikely to
take steps to weaken him as long as the Iran-Iraq war continues.
This analysis considers why the Gulf states would want to move
against Saddam, what the risks would be, and what actions they
might take.
Israel: Prime Minister Peres's Regional Development Plan
Prime Minister Peres has revived the idea of a regional development
fund to provide financial aid to key Arab states. The plan has been
received sympathetically by major Western donors, but translating
this mild encouragement into concrete action appears unlikely in the
near term.
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Israel: Time for Tax Reform
The Israeli economy has responded vigorously to the austerity
measures imposed by the National Unity government last July.
With inflation sharply reduced and the exchange rate stabilized, the
government must address tax reform and budget cuts to sustain
economic growth and stability.
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Israel: Fallout From Disarray in the Herut Party
Through no fault of its own, the Likud Bloc's Liberal Party has lost
its best chance for ensuring its political survival as a result of the
leadership crisis in the Likud's dominant Herut Party. In contrast,
Herut's glaring problems appear to have strengthened the political
standing of the ultrarightwing Tehiya Party.
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Lebanon: Reforming the Presidency and Its Powers
The Lebanese presidency and its prerogatives are likely to remain
major stumblingblocks to a settlement of the decade-old Lebanese
civil war. With the dwindling Maronite Christian community
unwilling to loosen its grip on the office, the presidency is losing
power and growing increasingly irrelevant.
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The Lebanese Army: Facing the End of the Road?
The Lebanese Army, its ranks decimated by desertions of Muslim
military personnel, faces its toughest military challenge?the
prospect of defending the Maronite Christian enclave against Syria
and its Lebanese Muslim allies?and, even if successful, it will
continue to disintegrate as real power passes to Lebanon's Muslim
majority.
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Lebanon-Syria: Drugs in the Bekaa
Efforts to dominate the lucrative drug traffic in Lebanon's Syrian-
dominated Bekaa Valley have become increasingly complex, with
Syrian military personnel, moderate and radical Shia factions,
Sunni Muslims, and Christian militias all playing a part. As long as
civil war and social disruption continue, there is little likelihood
drugs will lose their attraction.
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India: Gandhi Moves Toward Nuclear Option
Since he became Prime Minister in November 1984, Rajiv Gandhi
has moved gradually toward an Indian nuclear weapons program.
By raising the prospect of a nuclear-armed India, he almost
certainly hopes to dissuade Pakistan from the pursuit of nuclear
weapons and to encourage the United States to take stronger action
to restrain Islamabad.
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India: Declining Professionalism in the Indian Army
A recent open letter from the Chief of Army Staff to all Indian
officers warning against careerism, opportunism, and sycophancy
suggests that military professionalism has declined to unacceptable
levels and probably also reflects Rajiv Gandhi's priorities and
recognition that India's economic and social problems are harming
the Army.
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India-Pakistan: Gradual Progress on Economic Relations
Despite high-level official support for improved Indo-Pakistani
economic relations, progress is likely to be slow because of
bureaucratic resistance on both sides as well as opposition from the
Pakistani business community.
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Sri Lanka: Mahaweli Land Resettlement?The Impact 45
on Communal Rivalry
Prospects for settling Sri Lanka's ethnic conflict are complicated by
the competition between Tamils and Sinhalese for allotments of land
under the Accelerated Mahaweli Development Program. At stake is
apportionment of the newly irrigated land in the sparsely populated
dry zone of Eastern Province, a traditional Tamil homeland.
Sri Lanka: Colombo's Faltering Counterinsurgency
The Sri Lankan Government's counterinsurgency effort is stalled
despite a substantial military buildup, reconfiguring of the national
security bureaucracy, and gestures toward political accommodation
with Tamil separatists, and its continuing ineffectiveness will feed
the insurgency and foster a hardline Sinhalese backlash.
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Sri Lanka: Tamil Insurgent Ranks Grow
The number of Tamil insurgents has nearly doubled during the last
year, but rivalries between insurgent groups and disputes over long-
term strategy have limited their effectiveness and territorial gains
while undermining the strength of moderate Tamils attempting to
bridge differences in negotiations with the government.
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Saudi Arabia: Trouble With French Frigates
The difficulties the Saudi Navy is experiencing with the recently
delivered French frigate Madina constitute a major setback to
Riyadh's ambitious naval modernization program. Saudi displeasure
with French quality control, training, and general support is likely to
jeopardize future French arms sales to the Saudis.
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Saudi Arabia's Fourth Estate: Potential for Conflict With the 61
Government
Saudi Arabia's privately owned press is not subject to routine
prepublication censorship, but unwritten guidelines are causing
friction between it and the government. Heightened social,
economic, and political grievances among Saudis over the next
several years increase prospects for a serious confrontation, with the
press in the lead.
Tunisia: Bourguiba Struggles To Strengthen His Grip
President Bourguiba has undertaken a series of repressive measures
over the last several months to cope with increasing political unrest.
Although his opponents may be intimidated in the short term,
Bourguiba's crackdown could in time lead to greater cooperation
among his foes and increasing violence.
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Near East and
South Asia Review
Articles
Will the Persian Gulf States
Abandon Iraq's Saddam Husayn?
?An Alternative Analysis
general
consensus?with which we agree?that Gulf state
support for Saddam remains strong and that the
usually cautious Gulf leaders are unlikely to risk a
confrontation or to take steps to weaken him as long
as the war continues. The following alternative
analysis offers a speculative view on why the Gulf
states would want to move against Saddam, what
evidence exists to support this view, what the risks
would be in such a strategy, and what actions they
might take. It also considers the implications of such
Gulf state actions for US regional interests.
Disappointment With Saddam
Although the Gulf states have provided Iraq with firm
diplomatic backing and massive financial support?
approximately $25 billion in direct cash aid alone?
since the war started,
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recent trends in the war and that they may be laying
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? Gulf leaders indicated to US officials recently that
Iranian successes at Al Faw in February have
heightened their fears that Baghdad cannot contain
Tehran. This is a major concern for Gulf leaders
because they see a strong Iraq as their primary
defense against Iranian determination to export its
revolution.
Gulf rulers are
worried that Iran has a military edge over Iraq, that
Iraqi military morale is deteriorating, and that
Saddam has lost popular support.
? These states are acutely aware of Baghdad's
increasingly desperate financial situation and the
potential requirement for massive new aid
commitments to keep the Iraqis afloat.
In addition, the recent collapse of oil prices and
domestic pressures to cut financial commitments
could cause Gulf rulers to seek ways to limit aid to
Iraq. All the states face tight budget constraints, and
most are drawing down their foreign cash reserves.
Furthermore, lower oil prices are making it more
difficult to sell oil on Iraq's behalf. Domestic
opposition to foreign aid?even for crucial recipients
like Iraq?is likely to grow as these states cut
spending and impose other economic restrictions.
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Potential Benefits if Saddam Goes
Gulf leaders would hope that the replacement of
Saddam with a new Iraqi leader would forestall an
Iranian victory in the war and perhaps even persuade
Tehran to negotiate an end to the nearly six-year-old
conflict. Although Iran continues to maintain a hard
line on most aspects of a possible settlement, Tehran's
only irreducible demand has been the removal of
Saddam. His removal could throw Iran off guard and
cause disagreement among Iranian leaders on their
war policy by eliminating a key rationale for
continuing the conflict.
A new Iraqi leadership might be better able to pursue
a more imaginative and successful military defense of
Iraq. This could preserve the crucial buffer between
Iran and the Gulf states. It might also ease the near-
term financial drain on the Gulf states by winding
down the war effort, although an end to the conflict
could put more pressure on oil prices if both Iran and
Iraq increase output to finance reconstruction.
Saddam's removal might also encourage Syria to
loosen its ties to Iran, since much of the Damascus-
Baghdad rivalry is fueled by personal animosity
between Saddam and Syrian President Assad.
We believe, however, that, if the Gulf rulers became
convinced Saddam was losing the war, they would see
more risk in supporting him than in trying to ease him
out. If they reached such a conclusion, they probably
would be willing to risk possible retaliation by the
Iraqi President or his close supporters in order to
prevent an Iranian victory.
What the Gulf States Might Do
If Gulf leaders decided to act against Saddam, they
would do so indirectly. They tend to prefer a cautious
and accommodating approach in dealing with
dangerous neighbors. They are likely to begin by
sending subtle signals to both Saddam and his
possible opponents indicating their new position:
? They might begin privately to question Saddam's
performance and prospects with Iraqi or other Arab
emissaries.
? They could drag their feet on aid commitments.
More dramatically, but less likely, they might
impede Iraqi oil exports through the new Iraqi-
Saudi pipeline.
Risks in Moving Against Saddam
The Gulf rulers no doubt recognize there would be
significant risks in seeking to unseat Saddam. They
are afraid of angering the Iraqi leader, whom they
view as a dangerous and vindictive man. We believe
Saddam would retaliate against the Gulf ruling
families if he suspected they were supporting a move
against him. He probably would not hesitate to resort
to assassination or terrorism against his Gulf
neighbors.
The Gulf states also probably recognize that a change
in leadership in Iraq would initially have some
negative impact. For example, they might have to
increase aid substantially for a time to shore up the
new Iraqi leadership and help prevent wider internal
upheaval in Iraq. Attempts by a new Iraqi regime to
consolidate its power and settle old scores could spill
over into the Gulf states. Saddam's removal also
might be viewed by Tehran as a sign of Arab
weakness and thus embolden the Iranians to ?ress the
Gulf states and Iraq even harder.
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? Their contacts inside Iraq could be used to begin
looking for a possible successor with acceptable
Islamic and Iraqi credentials and the requisite
military appeal. They would want a figure who
could pull together an alternative government and
might then explore ways to funnel aid directly to
him.
? They might begin to stress publicly their
commitment to the government and people of Iraq
but ignore mentioning Saddam.
Should the Gulf rulers decide to work for Saddam's
removal, they might decide to put aside their
traditional reluctance to deal more directly with the
Soviet Union and urge Moscow to apply pressure on
Saddam. Gulf leaders have long believed that the war
will not end until the superpowers become directly
involved, but they probably realize that US influence
on the conflict is minimal. Moscow, on the other
hand, wields some leverage in Baghdad, largely
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because of Iraqi dependence on Soviet weapons. Gulf
leaders would judge that Moscow had a vested
interest in seeing a friendly government replace
Saddam and in doing the Gulf states a favor.
Timing would be crucial in any decision to move
against Saddam. If the effort was intended to
convince Iran that the Gulf rulers wanted a peaceful
resolution of the war, then Saddam would have to be
replaced before Iran's next major military victory. If
it were to come after a large-scale Iraqi military
defeat, then Tehran probably would see such a change
as a sign of desperation by the Gulf rulers and might
harden its position. Ironically, the Gulf states are not
likely to make the effort unless Iraq has suffered
another serious military setback
Impact on the United States
Gulf actions that help unseat Saddam would have a
mixed impact on US interests in the region.
Washington has invested considerable effort to
improve ties to Baghdad, and a new Iraqi regime
probably would be eager to continue and perhaps even
strengthen ties to the United States. If the change led
to an end of the war, the strategic threat to
Washington's Gulf allies would be diminished. US
influence with the Gulf states might decline if the end
of the conflict reduced their sense of dependence on
the United States.
If the Soviets helped remove Saddam but did not
meddle further in Baghdad, the USSR's diplomatic
position in the Gulf would improve marginally.
Moscow would earn the gratitude of Riyadh and
could accelerate slightly the general Arab movement
toward normalizing relations with the USSR. The
Gulf states will remain suspicious of the Soviets,
however, and, ironically, their fear of Soviet meddling
might be intensified by a successful Soviet role in
changing the leadership in Iraq, even if Gulf rulers
supported such actions.
A failed effort also would have mixed repercussions
for the United States. It might precipitate internal
turmoil in Iraq that could weaken Baghdad's ability
to forestall an Iranian victory. This would undermine
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US diplomatic and strategic equities in the Gulf
region. In addition, Saddam would suspect
Washington of complicity in any Gulf state plot
against him because of the close links between the
United States and the ruling Persian Gulf families.
Efforts by Gulf leaders to seek assurances of US
protection against retaliation from Saddam Husayn
would probably solidify his suspicions.
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Israel: Prime Minister Peres's
Regional Development Plan
Israeli Prime Minister Shimon Peres has revived the
idea of a regional development fund to provide
financial aid to key Arab states. The plan, which is
only in the preliminary stages of development, has
been sympathethically received by the United States
and has elicited rhetorical support from some
European leaders, such as Chancellor Kohl of West
Germany and Prime Minister Craxi of Italy. Beyond
this mild encouragement, however, the plan faces
formidable political and economic impediments.
Transforming the initial positive reception to the idea
into concrete action appears unlikely in the near term.
The Concept
The idea of a regional development fund dates back to
the Israeli and Egyptian discussions following
conclusion of the Camp David accords in 1978. Peres
recently reintroduced the idea in light of the drastic
fall in oil prices and the current recession in the
Middle East. The Prime Minister, like many in his
Labor Party and in other relatively dovish groups in
Israel, is particularly worried about the political
stability of Israel's moderate Arab neighbors, Egypt
and Jordan. He is apprehensive that the drastic fall in
oil prices will further deepen the current recession in
the region by:
? Cutting into export earnings.
? Causing a fall in Arab aid flows.
? Reducing the flow of worker remittances.
? Eventually causing the return of expatriate workers.
Peres suggests that the industrialized countries
recycle some of the savings generated by the fall in oil
prices into a regional development fund. In his view,
investments by the fund would help relieve the
economic consequences of the recession, enhance
regional economic and political cooperation, aid
political stability, and lay the groundwork for progress
toward an Arab-Israeli peace settlement.
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The fund is envisioned to total $20-30 billion in aid
over a 10-year period. The major contributors to the
fund would be the industrialized countries,
particularly the Big Seven.' Multilateral financial
institutions, development banks, businesses, and even
individuals?through bond purchases?would also be
asked to help. The fund would be used for regional
development projects in Jordan, Egypt, Lebanon,
Syria, and the West Bank and Gaza. While Israel was
originally mentioned as a recipient and a possible
partner in some regional projects, Peres has stated
that Israel would stand aside if the political
consequences of Israeli participation would kill the
idea.
Although details of the organizational framework
have yet to be worked out, the idea is to establish an
informal international donors group, similar in
concept to the World Bank?sponsored consultative
groups. Administration of the funds and projects
could be carried out on a multilateral or a bilateral
basis between donor and recipient countries, with no
new organizations being formed.
The Constraints
Any regional cooperation scheme that involves Israel
immediately raises major political implications. Some
donor countries will be reluctant to contribute to any
such fund unless assured that there will be no negative
reaction from the major Arab states?an unlikely
prospect. Recipient countries, particularly Syria, will
not want to be associated with any plan even
indirectly involving them in cooperation with Israel.
There is also the touchy question of development
projects in the West Bank and Gaza that would be
seen by many Arab states as strengthening Israel's
control over the territories.
' The Big Seven include the United States, the United Kin dom,
West Germany, France, Italy, Canada, and Japan.
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The economic problem of generating funds for the
plan is also formidable. All of the major potential
donors have budget problems and have undertaken
deficit reduction programs that make it difficult to
find uncommitted funds. The savings generated by
the fall in oil prices will in most cases accrue to
private consumers and businesses. The United States
has urged the major industrialized countries not to tax
away the benefits of lower oil prices but to allow these
benefits to flow through the economy in the form of
higher growth and lower inflation. Such higher
growth and lower inflation, coupled with savings on
the civilian and military fuel bill, will ultimately help
governments ease the budget crunch. Most
governments will be interested in using the savings
and increased revenue to reduce their deficits rather
than providing new funds for foreign aid.
Arab Reaction
Potential Arab beneficiaries seem interested in the
fund as a new source of development aid, but they are
deeply skeptical of Israel's role
Egypt, due in part to its great need for foreign aid and
because it has already made peace with Israel, is the
Arab country most receptive to the idea. Egyptian
officials have expressed doubts, however, that the plan
will get off the ground because of a lack of general
Arab support for the proposal.
Jordan's King Hussein has expressed some interest in
the plan and has asked to be kept informed on related
developments, but he has cautioned that hopes about
prospects for the fund should not be raised
prematurely. In addition, Prime Minister Rifal has
made clear the Jordanian desire that any funds
destined for the West Bank be channeled through
Jordan.
The Syrian press has castigated the regional
development plan as an "economic Camp David,
whose objectives are to kill Arab steadfastness and to
tie the Middle East more firmly to the economy of the
West." Privately, Syrian Foreign Minister Shara` has
expressed strong opposition to Israel's role but has not
excluded Syria's participation.
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Government officials in Kuwait and Qatar have
stated that they believe a political solution to the
Arab-Israeli dispute must be found before a regional
economic plan would be feasible. Arab League
Secretary General Klibi recently expressed a similar
view when he publicly criticized the proposal, calling
it a maneuver to distract the world from the peace
process.
Donor Reaction
Reaction to the Peres plan among potential donor
states can be summed up as:
? Acceptance of the need for increased aid to the
Middle East.
? Some top-level enthusiasm for the idea of a fund.
? A profound reluctance to believe that additional aid
funds can be found in governmental budgets.
? Deep skepticism that such a regional plan is
politically feasible.
Japan is in the best position economically to
contribute to the development fund. Although running
a budget deficit, the Japanese Government has
committed itself to doubling its foreign aid over the
next two years. The vehicle of a regional development
fund would seem to suit Japan's desire to remain a
low-key aid donor and would spare Tokyo the need to
deal with Israel directly in providing aid funds. The
Japanese, however, are acutely sensitive to the
political implications of moves in the Middle East,
and a negative reaction to the plan by the Arab states
would kill prospects for Japanese participation.
West Germany, which is incurring a relatively
unburdensome budget deficit, is also in a position
economically to contribute to a Middle East fund.
Finance Minister Stoltenberg, a politically strong
member of the government, is committed to a deficit
reduction program that he hopes will lead to further
tax cuts, so there will be great reluctance to become
committed to an extensive new aid scheme. Other
West German officials have expressed skepticism
about the economic and political feasibility of the
plan.
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British officials have stated that the plan is a
nonstarter on both political and economic grounds.
Given the United Kingdom's current efforts to reduce
its budget deficit and the uncertain effects of falling
oil prices on government revenue, money for the fund
will be extremely difficult for the British to find.
Italian, French, and Canadian officials agree on the
need for greater development aid to the Middle East.
Nevertheless, all three are experiencing budget
deficits and will be hard pressed to come up with the
money to contribute to the proposed fund
Outlook
Peres's advocacy of the Middle East regional
development plan has probably ensured minimal
progress over the near term. Under current
circumstances, it is unlikely that enough of an Arab
consensus can be garnered to make the plan
acceptable to the Japanese and other potential donors.
Peres is not likely to let the plan die, however, and is
probably prepared to continue pressing it for quite a
while. He will certainly push the idea during his
remaining days as Prime Minister in the hopes of
getting Likud to go along with it after the October
rotation. He will also be able, with less prospects of
success, to pursue the plan when he becomes foreign
minister.
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Israel:
Time for Tax Reform
The Israeli economy has responded vigorously to the
austerity measures imposed by the National Unity
government last July. Inflation has declined to 1.5
percent per month compared to 12.1 percent a year
ago, and the exchange rate has remained virtually
stable since last July. The government must address
other key economic issues in the coming months?
such as tax reform and reducing the government
budget?to sustain economic growth and stability.
Easing the tax burden would spur investment and aid
productivity while encouraging the government to
implement real spending cuts. Substantial efficiency
costs and tax avoidance associated with the current
tax system also could be reduced by simplifying the
overall tax structure.
A Heavy Tax Burden
With government revenue nearly one-half of GNP,
the tax burden imposed on Israel's economy is
extremely high. This tax burden undercuts the
public's willingness to work, influences the decisions
of workers who are contemplating whether to actively
search for employment, and reduces productivity.
Income taxes, which totaled about $3.7 billion last
year and provided about 40 percent of government tax
revenue, constitute one of the heaviest restraints on
the economic system. Salaried workers, whose share
of total income taxes decreased from 55 percent in
1984 to 41 percent last year, nevertheless continued to
be hard hit. A worker who earned 85,000 shekels in
April 1984?the equivalent of $500?watched his
nominal monthly wage rise to 700,000 shekels by July
1985, still about $500. With high marginal tax rates,
however, the higher nominal income shifted the
worker to a higher tax bracket. Because tax brackets
could not be adjusted quickly enough to account for
inflation, the salaried worker was worse off.
Self-employed individuals made a larger percentage
contribution to income tax revenues last year than in
1984, but they were still better off than salaried
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Israel: Tax Revenue by Source, 1985
Percent
Total: US $9.7 billion
Other 11.0
National
insurance
taxes 15.1
Value-added
taxes 16.7
309076 5-86
Income taxes
37.9
Import taxes
19.3
workers. The bulk of taxes for self-employed workers
was due after the year was over?in contrast to
salaried workers, whose taxes are automatically
deducted from their paychecks throughout the year.
By bundling earnings as much as possible at the
beginning of the year while placing expenditures at
the end, the self-employed greatly reduced their real
tax payments to the government.
A strange anomaly in Israel's otherwise burdensome
tax system is that many types of unearned income are
not taxed. Capital gains, for instance, are not taxed at
all. Dividends and most interest income also go
untaxed.
Receipts from the value added tax (VAT)?a tax
levied on firms according to the value assigned to a
particular good by a firm?yielded the government
about $1.6 billion in 1985 or 17 percent of total tax
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revenue. In effect, the VAT?currently 15 percent?
acts as a proportional sales tax on production.
Although the VAT is an excellent tax revenue
source?since it is relatively easy to collect and limits
tax avoidance?it imposes high costs on the economy
and Israeli consumers, as firms pass on the tax
through higher product prices.
Numerous other taxes have added to the Israeli
taxpayers' burden:
? Israelis traveling abroad must pay a travel tax
equivalent to $120.
? New car purchases saddle the normal Israeli buyer
with four kinds of taxes that raise the price of a
typical $3,000 car to about $13,000. New
immigrants, who have a three-to-five-year grace
period to purchase a car at significantly lower rates,
are the only ones able to escape this burden.
? Property taxes, paid to the national government
alone, amounted to $232 million last year.
? Additional tax measures in the recently adopted
national budget call for a one-time levy on the
combined incomes of retired people and impose new
education fees. A "one-time" levy on private
automobiles imposed last year was reinstated under
this year's budget.
The Untouchables?
Given Israel's large annual trade deficit, import taxes
are not likely to be reduced in the near term. By
imposing taxes on imports, especially durable goods,
the government has a viable policy tool through which
it can directly discourage consumption and help
correct the trade imbalance. Taxing imports has also
provided the government with a valuable revenue
source, with import tax revenues totaling about $1.9
billion in 1985.
Given the egalitarian beliefs of Israeli society,
national insurance taxes?to fund the country's
welfare system?also are unlikely to be cut. These
revenues totaled about $1.5 billion last year.
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Table 1
Comparative Tax Rates
Percent
(except where noted)
Israel
United United States
Kingdom
Income tax rate on 50
$10,000 50
29 9
Value added tax rate 15
15 0-6?
Auto purchase taxes b 300(+) $130-140 0-5 a
Property tax rate C 4.8
RV d Less than 2
Per capita import taxes $445 e
or customs duties
NA $50100c
a Local and state sales taxes.
b Additional taxes as a percentage of car's original price.
c Calculated as a percentage of property's assessed value.
d Property tax rate calculated as roughly $1.73 per dollar of the
property's rental value, which is significantly below the assessed
value.
Estimate.
What To Do?
With inflation currently at manageable levels, the
Unity government has an opportunity to examine the
incentive effects of the tax system on both investment
and labor supply. Such an examination would be an
essential preliminary step to major tax reform:
? Average and marginal income tax rates could be
reduced. Taxes on capital gains and other
nonearned income could be imposed.
? The proliferation of new taxes, such as education
levies, travel tax additions, vehicle taxes, and levies
on pensioners, could be halted.
? Reductions in other tax rates?such as those on
property?could further reduce the tax burden.
Taxes on luxury apartments and houses should be
reexamined to avoid the current double taxation at
the national level and by local municipalities.
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Table 2
Possible Economic Benefits
From Tax Reform
Tax Cuts Tax and
Only Spending Cuts
Real GNP
Real investment
Productivity
Real private consumption
Inflation rate
Unemployment rate
Government deficit
Key: (+) indicates a variable increase.
(?) indicates a variable decrease
while (?) is an uncertain effect.
Reducing the number of taxes and settling for broad-
based taxes would also increase the efficiency of tax
collection. Closing loopholes available to high income
individuals should also be taken to reduce the
regressive nature of Israel's tax system, which places
a relatively heavier burden on lower income
individuals.
Tax Reform Benefits
By reducing taxes and easing the overall tax burden,
the Israeli economy would probably expand and
improve its performance. If tax reductions were
combined with an appropriate cut in real government
spending, productivity would benefit through greater
work effort while investment growth would be
encouraged. With more money to spend, real private
consumption would increase, spurring real GNP. The
unemployment rate might initially increase from the
average fourth-quarter 1985 rate of 6.6 percent?
depending on how reductions in government spending
were implemented?but it would ultimately decline
with the expanding economy.
By reducing taxes without a corresponding cut in
government spending, the economy would not perform
as well. Productivity would increase in response to the
tax cut, but investment growth would be uncertain
Reverse Blank 11
because the government would still be competing with
the private sector for the same funds. Real GNP
should increase as taxes are cut. This, however, would
probably be accompanied by a higher inflation rate
because the government would be forced to finance an
even larger budget either by printing more money or
by borrowing in capital markets.
Outlook
To implement tax reform, the government must first
reduce its expenditures. The government, however,
failed to make real cuts in the recently adopted
1986/87 budget. Instead, the budget offers a variety
of new taxes.
Prospects for initiating tax reform also appear dim as
Labor and Likud seek to position themselves
favorably with the electorate. Because tax reform
must be accompanied by real government spending
cuts entailing a cutback of government services,
neither party wants to be linked with tax reform at
this time.
The resignation of Finance Minister Moday further
hinders tax reform efforts because his replacement,
Moshe Nissim, is a low-key Likud loyalist who does
not wish to rock the boat. Any action on
comprehensive tax reform is likely to be deferred at
least until October when Likud is scheduled to regain
control of the Prime Minister's portfolio and when
Likud may reappoint Moday Finance Minister. In the
interim, only piecemeal measures are likely to be
adopted.
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Israel: Fallout From Disarra
in the Herut Party
Through no fault of its own, the Likud bloc's Liberal
Party has lost its best chance for ensuring its political
survival as a result of the leadership crisis in the
Likud's dominant Herut Party. The Liberals'
scheduled merger with Herut, which would have
guaranteed them one-third representation in Likud
executive institutions, has been indefinitely postponed
because of the conflicting interests of the rivals for
Herut leadership. Likud leader Shamir welcomes the
integration of the two parties in hopes of benefiting
from the Liberals' added support, but his Herut
rivals?Deputy Prime Minister Levi and Commerce
Minister Sharon?oppose giving the Liberals a say in
determining the Herut leadership. Liberal Party
leaders have little leverage to compel Herut to live up
to its prior agreement, and some may consider bolting
and making the best deal they can for themselves with
other parties.
In contrast, Herut's glaring problems appear to have
strengthened the political standing of the
ultrarightwing Tehiya Party. Recent public opinion
polls show Tehiya's popularity has increased at the
expense of Likud and Kach
Party. Tehiya's leaders nonetheless probably are
concerned that the disarray in Herut may have
weakened public support for the political right wing in
general and reduced Likud's ability to form a narrow
coalition that would be committed to the aggressive
platform of Tehiya and other rightwing parties calling
for the annexation of the occupied territories.
Merger on Hold
The most recent round of Herut infighting in early
March has indefinitely postponed its merger with the
Liberal Party to form a unified Likud Party. The
merger agreement, which was worked out by Levi and
former Defense Minister Arens last January,
guaranteed the Liberals control for the next five years
of one-third of the positions in all unified party
institutions?including the Central Committee, which
will choose the next leader of Likud and its candidate
for the premiership before the next election. At the
13
end of five years, party institutions were to be chosen
from among the entire unified Likud Party, and the
remnants of the Liberal Party would have no
guaranteed representation.
Shamir and Arens probably would like to proceed
with the merger in hopes of benefiting from the added
support of the Liberals, who tend to support the
Shamir camp. The US Embassy in Tel Aviv reports,
however, that Levi?and presumably Sharon?oppose
the merger because it would give the Liberals a say in
choosing the Likud leader and because they fear it
would tip the balance of party power in Shamir's
favor. The Embassy quotes one Levi aide who said
that the Deputy Premier is not about to repeat the
mistake he made in agreeing to the recent integration
into Herut of another small party, La'am. La'am's 9-
percent share of the delegates to the Herut convention
played a key role in the defeat of Levi's candidate for
chairman of the convention. Levi aides have warned
of a major blowup in Herut if Shamir tries to push the
Herut-Liberal merger through the current Central
Committee.
Options for the Liberals
The Liberals are considering their options as a result
of the disarray in Likud. Party head and former
Finance Minister Moday, who helped negotiate the
merger agreement with Herut, has staked his Liberal
Party leadership on the deal's successful conclusion,
and he continues to lobby hard for its approval by
Herut. This decision, however, is beyond his control so
long as the leadership of Herut is bitterly contested.
Even though Shamir and Arens would like to bring
the Liberals into the party, it is not likely that they
can overcome Levi's and Sharon's opposition unless
Shamir regains control over the Herut convention or
the new Central Committee. Nor is the issue of the
merger one on which any of the Herut rivals appears
willing to stake his future.
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The Liberals may offer to renegotiate the merger
terms in hopes of enticing Herut to approve it. They
may accept some whittling down of their
representation in the Knesset list and in the Central
Committee, leaving them with little or no influence on
key Herut or Likud decisions. Levi has said that in
principle he would welcome the integration of the
Liberals into Herut as long as they are not uaranteed
Knesset seats or Central Committee slots.
Some disenchanted Liberals are considering leaving
the 21-year partnership with Herut if the merger does
not become a reality. Among the possibilities being
discussed are:
? Forming an independent Knesset list. As a bloc of
12 Knesset seats, the Liberals might gain some
leverage to extract better terms from Herut or to
position themselves to benefit from competitive
bidding from other parties in the current Knesset.
This leverage probably would disappear, however, if
faced with an imminent national election because of
the Liberals' poor prospects of gaining more than
two or three seats in parliament if they go to
elections alone. Herut leaders probably would not
regard seriously a Liberal threat to bolt under these
conditions.
? Joining the Liberal Center Party. The current bloc
of Liberal Knesset members already has rejected
associating with the new Liberal Center Party,
recently formed by a few Liberal mavericks. Some
might be tempted to reconsider this option,
particularly those like Science Minister Patt, who
are in disfavor with Moday and whose inclusion on
future Likud Knesset lists is in doubt.
? Aligning with Labor. Liberal Party kingpin Moday
has ruled out an alignment with Labor in a narrow
coalition even if the Liberals' merger with Herut is
not realized, but Israeli media reporting suggests
some Liberals have discussed this possibility with
senior Labor Party officials. During the recent
Cabinet crisis over Moday's departure from the
finance portfolio, Tourism Minister Sharir of the
Liberals was reported to have explored privately this
option with Prime Minister Peres. Sharir denied the
rumors, but other Liberal Knesset members like
Secret
Israel's New Liberal Center Party
In early January, Liberal Party members opposed to
their party's continued alliance with Herut officially
broke away and established the new Liberal Center
Party. Among the new party's leaders are the popular
mayor of Tel Aviv, Shlomo Lahat; the head of the
Jewish Agency, Arye Dulzin; and former Energy
Minister Yitzhak Berman, who resigned from the
government of former Prime Minister Begin in the
wake of the war in Lebanon. The party's platform
calls for shifting to a free enterprise economy that
would reduce government regulation and simplify the
tax structure. On foreign policy issues, the party is
inclined toward territorial concessions in exchange
for peace agreements with Israel's Arab neighbors.
Lahat told US officials recently that he was prepared
to return to King Hussein all of the West Bank except
East Jerusalem on condition that Jews be allowed to
settle in all of Palestine. He also said he would
negotiate with PLO Chairman Arafat even if he did
not agree to the conditions of recognizing Israel,
renouncing terrorism, and accepting UN Security
Council Resolutions 242 and 338.
Patt who are in disfavor in the party might be more
inclined to align with Labor. They would face
opposition from Labor Party activists, who would
object to guaranteeing the Liberals positions on
Labor's list of candidates for the next election?the
probable cost of the Liberals' cooperation in a narrow
Labor-led government. The Embassy reports Labor
supporters are already grumbling about party bosses
having promised a disproportionate share of Labor's
next Knesset list to former Defense Minister
Weizman's Yahad Party, and they are not inclined to
give away more seats to newfound allies.
Herut's Loss May Be Tehiya's Gain
The ultranationalist Tehiya Party, which advocates
the immediate annexation of the occupied territories,
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has done well in recent public opinion polls at the
expense of Likud and of Rabbi Kahane's Kach Party.
The polls indicate that Tehiya could double its current
five seats in the Knesset if an election were held now.
The Embassy reports that Tehiya leaders believe the
power struggle in Herut is likely to benefit Tehiya's
popularity further. They recognize, however, that
public opinion polls can be deceptive, and they are
trying to build a broader based constituency that will
help them hold their strength against the attractions
of Likud on their left and Kach on their right. At
Tehiya's national convention in mid-April, it
attempted to broaden its appeal by completing the
integration of former Chief of Staff Eitan's Tzomet
movement into Tehiya and by proposing that
Palestinian refugees in the occupied territories be
resettled in Arab countries. Both of these actions were
intended, in our view, to strengthen Tehiya's appeal to
anti-Arab sentiments in Israel without going to the
extremes of the Kach Party. Tehiya leaders also
addressed a broad range of issues?including
negotiations with Egypt on the Taba border dispute
and relations with the United States?in an apparent
effort to show that Tehiya is interested in more than
just settlements in the occupied territories.
Party leader Ne'eman told Embassy officers recently
that in his view Herut's failure to heal its internal
differences has made it less likely that Peres will hand
power over to Shamir in October and could lead to the
breakup of Herut. Should Herut split, Ne'eman
believes an electoral alliance between Tehiya and the
Shamir/Arens faction would be a natural
development because of their common views on
retaining the occupied territories. Ne'eman does not
regard Sharon's commitment to keeping the
territories as genuine, citing as evidence the widely
known story that a decade ago Sharon had offered to
join hands with a former Labor Knesset member
favoring withdrawal from the territories.
Ne'eman hopes that if Shamir assumes the
premiership in October, he will invite Tehiya into the
unity coalition and give it a Cabinet seat. Ne'eman
told his Embassy interlocuter that he would work to
get more government funding for existing settlements,
Reverse Blank
15
although he realized it was unlikely that new
settlements in the territories would be established.
Outlook
Until Herut gets its house in order, its merger with
the Liberals will remain on hold, and the Liberals will
be left with no good options. The best chance they had
for ensuring their political future is the one they
apparently have lost through no fault of their own:
merger with Herut with a guaranteed one-third of all
positions in party organs, including the next Likud list
of candidates for election to the Knesset
The Liberals' principal problem is that their electoral
appeal is limited, and, therefore, they have little
leverage to force Herut to abide by its previous
agreement or to negotiate a new favorable agreement.
Under these conditions, individual Liberals may break
off from Likud and make the best deals they can with
other parties.
Tehiya, on the other hand, can bask in the glow of its
heightened popularity, but it is uncertain whether its
newfound appeal can withstand the test of an election
campaign. Tehiya's leaders have to be concerned that
the disarray in Herut may have weakened public
support for the political right wing in general and
undermined Likud's ability to put together a narrow
coalition. If this is the case, Tehiya's enhanced
standing may be only transitory and will not have
brought it any closer to achieving its objective of
establishing more settlements in the occupied
territories.
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Lebanon: Reforming the
Presidency and Its Powers
The Lebanese presidency and its prerogatives are
likely to remain major stumblingblocks to a
settlement of the decade-old Lebanese civil war.
Lebanon's dwindling Maronite Christian community
is unwilling to loosen its grip on the office. The
President's powers constitutionally are designed to be
balanced by those of the Council of Ministers, headed
by a Sunni Muslim Premier, but precedence practiced
under the unwritten National Pact of 1943 gives the
Christian community a marked political and
psychological advantage over Lebanon's Muslims?a
major cause of the civil war. Syria and its allies in
Lebanon are demanding revisions in the President's
power, while the Christians are hinting at a new
power-sharing agreement between Christian and
Muslim leaders. With no solution in sight, the
presidency is losing power and growing increasingly
irrelevant.
The Presidency Then and Now
Before 1975, the official start of the civil war,
Lebanese presidents dominated the country's political
system and the distribution of its benefits. The
Lebanese executive enjoyed disproportionate
influence over the legislative and judicial branches of
government. This preeminence was magnified by
political fragmentation in the religious communities,
which undermined the positions of political parties.
Political parties in Lebanon operated in an ideological
vacuum, allowing the President to intervene in
parliamentary elections on behalf of politicians
sympathetic to the President's desires.
Ever since the civil war began, presidents have found
it increasingly difficult to influence events. They can
neither stop the war nor can they devise a credible
reform acceptable to the rival militias. President
Amin Gemayel is rendered helpless because of his
inability to transform sectarian interests into national
policies. Gemayel's power is so eroded that he cannot
travel outside of the Christian ministate northeast of
Beirut for fear of being killed by his opponents.
17
Gemayel's grip on governmental institutions outside
the Christian enclave probably will continue to
weaken. Presidential authority is now mainly
symbolic, limited to administrative functions devoid of
substance. Despite its fragmentation, the government
continues to perform essential services for all parts of
the country. Salaries of government and military
personnel continue to be paid by the Treasury, even
though many employees refuse to report to work for
security or personal reasons. All rival militias accept
as legitimate such state services as road building,
electrification of neighborhoods, and water and
telephone services, if they are rendered equally in
various regions of the country.
The President views his role in providing essential
services as a means for maintaining some control over
vanishing state authority. One of the most durable
governmental institutions is the Bank of Lebanon.
The bank continues to influence the monetary market
virtually unaffected by the political chaos surrounding
it. Recently, however, there has been growing
discussion of duplicating the bank's functions in East
and West Beirut, which would further erode
Gemayel's standing.
Inside the Maronite Canton
Even among the Christians, sectarian, family,
traditional, geographic, and economic cleavages are so
sharp that a virtual parity of power exists between the
two major actors?Gemayel and Samir Ja'Ja,
commander of the Christian Lebanese Forces militia.
Ja'Ja joined forces with President Gemayel on 15
January and violently ousted his rival Elie Hubayqa,
former commander of the Lebanese Forces.
Ja'Ja is forging links
between the Lebanese Forces and Gemayel's
supporters to ensure su ort for the militia within the
government.
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Key Christian Contenders
for Political Power
Gen. Michel Awn
Christian Militia
Commander, Ja'Ja
Minister of Telecommunications,
Joseph al-Hashim
The precarious relationship between Ja'Ja and
Gemayel illustrates Gemayel's increasing reliance on
Christian factional groups to augment his dwindling
powers.
Despite the decline of the presidency, Christians
continue to view the office with great respect. The
presidency provides the Maronite Christians with a
political identity and a sense of security. Most
Christians believe that, although political reforms are
needed, such reforms should not be granted at the
expense of the presidency. Christians believe that they
may eventually be reduced to second-class status if
they make concessions on presidential powers.
According to the US Embassy in Beirut, a highly
placed Christian Phalange Party official stated that
even sharing presidential powers is unacceptable
because it may lead to chaos.
The Presidency and the Army
Lebanese presidents must increasingly rely on the
allegiance of key Army brigade commanders to
remain in office. Loyalty of the current Army
commander, Michel Awn, is necessary but not
sufficient for President Gemayel's political survival.
Awn as a professional soldier occasionally finds
himself at odds with the President.
Ak.wn is politically ambitious and
may covet the presidency,
Awn someday may
pose a threat to Gemayel's presidency.
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Any attempt by Awn to wrest the presidency from
Gemayel would need the support of both the Lebanese
Army and the major Christian militia chiefs,
especially Ja'Ja.
relations between Ja'Ja and Awn have dramatically
improved since the ouster of Elie Hubayqa last
January.
Ja'Ja recognizes the preeminence of the Lebanese
armed forces and is willing to increase his cooperation
with its officers. Awn in return is impressed with
Ja'Ja's leadership ability.
The Presidency and Political Reform
We doubt that any political formula could solve the
continuing civil war. Major peace efforts, however,
continue to center on finding a way to devolve the
presidency. The most important effort was the Syrian-
sponsored Tripartite Agreement signed in Damascus
in late December 1985 by rival Lebanese militia
leaders Elie Hubayqa, Walid Jumblatt, and Nabih
Barri. Gemayel refused to endorse the agreement,
claiming that it would severely curtail his powers. The
agreement would have reversed the constitutional
roles of the President and the Council of Ministers by
increasing the powers of the latter?especially the
Prime Minister?and leaving the President with a
mostly ceremonial role.
The Syrians insist that their efforts to end the
Lebanese civil war would have succeeded but for the
opposition from Gemayel, Ja'Ja, and former President
Camille Chamoun. The Syrian regime continues to
call for the resignation of President Gemayel and is
pressing the Christians to agree to sign the Tripartite
Agreement. There are no precedents for a President
resigning, however, and Amin seems determined to
stay. Syria lacks the support in the Lebanese
parliament to oust Gemayel. It could seek his
assassination, as it did his predecessor Bashir
Gemayel, but it has no one ready to take his place.
To counter the increased Syrian pressure following
the ouster of Hubayqa, the Christian community has
been forced to develop alternatives to the Syrian plan.
Foremost among these is a novel proposal that would
rotate the presidency, the premiership, and the
speaker of parliament among the major sectarian
19
Secret
contenders. The new proposals, sponsored by five
leading independent Maronite members of
parliament, are cast as a revision to the Tripartite
Agreement and have received initial approval from
key Christian politicians and militia leaders. Besides
recommending that the presidency be rotated, the new
proposals?unlike the Syrian-sponsored accord?aim
at restructuring the existing distribution of offices
among the country's religious communities, while the 25X1
Syrians have pushed toward full deconfessionalization
of the Lebanese political system. The US Embassy in
Beirut reports that Lebanese presidential adviser Elie
Salem sees great benefit in such a proposal, but he
cautioned that this will not ease the deep animosities
among the rival factions.
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Responding to the Christian initiative, Prime Minister
Karami and former President Franjiyyah, both foes of
President Gemayel aligned with Syria in Lebanon,
have put forward yet another reform initiative to
break the deadlock over the Syrian-sponsored accord.
The US Embassy reports that this proposal may open
the door for a compromise. Franjiyyah calls
repeatedly for the isolation of Gemayel, but he is
reluctant to agree to reducing presidential powers.
The Succession Dilemma
We believe that the sudden death or resignation of
Gemayel would add even deeper uncertainties to the
Lebanese crisis. There is no obvious successor to
Gemayel who could pull Lebanon out of its misery.
Syria is not likely to attempt to replace Gemayel with
former President Franjiyyah or possibly with General
Awn because neither is likely to yield to Syrian
demands on reducing presidential powers.
Among the possible alternative candidates would be
former President Charles Helou, parliamentarian
Edward Hunayn, former presidential candidate
Raymond Edde, or Joseph al-Hashim, currently the
Minister of Telecommunications. Helou and Hunayn
are ardent Maronites. Helou often supports Lebanon's
identification with Arab causes, but, like Hunayn, he
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Possible Compromise Christian
Presidential Candidates
Former President
Charles Helou
Former presidential
candidate Raymond Edde
Edward Hunayn
would probably resist attempts to reduce the
community's political standing vis-a-vis its Muslim
counterparts. Edde has not been implicated in any
atrocities in the civil war, but his self-imposed exile in
Paris and his opposition to both the Lebanese
Christian militias and Syria reduce his possibilities for
success. Hashim is a skilled Maronite politician who
advocates Christian resistance against Syria and its
factional Lebanese allies. He could emerge as a viable
presidential candidate from the Christian community
as a corn romise nominee between Ja'Ja and Awn.
It is conceivable that a non-Maronite Christian may
be Syria's alternative to Amin. A Greek Orthodox
Christian such as former Lebanese Ambassador to the
United Nations Ghassan Tueini could be selected as a
compromise and as a last resort. Tueini lacks the
political backing that could render his candidacy
serious. He is known to have opposed the original
entry of Syrian troops into Lebanon in 1976, an
attitude that ?uts him at odds with the current Syrian
leadership.
We do not know what would happen if Gemayel were
suddenly deposed. We believe that the centralized
presidency is fading because of the ascendency of
Shia and Druze power. Selecting a Muslim president
is also a distant possibility, but this would entail
drastic revisions in the 1943 National Pact, as well as
the Syrian-sponsored Tripartite Agreement?a move
unacceptable to Damascus.
Prospects
A major part of the stalemate in Lebanon revolves
around the inability of the religious communities to
agree on political reforms, especially those dealing
with redistribution of presidential powers. The
Christian community is committed to maintaining its
hold on the increasingly powerless but symbolic
presidency while pledging itself rhetorically to
accomplish vague political reforms. The Druze and
Shia militias undoubtedly will continue their quest for
an increased share of the political pie.
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Attempted political compromise worked out at the
behest of Syria is likely to be resisted by all factions.
The Christians will not accept any reduction of
presidential powers or the election of a non-Maronite
Christian as president. Druze and Shia Muslims will
most certainly object to the continuation of a
Christian presidency and will continue to vigorously
seek an overhaul of the existing political structure.
Forcing Gemayel to resign or ordering his
assassination is likely to throw Syrian policymakers
even deeper into a quandary, since no Christian or
Muslim leader has the political or military influence
needed to replace Amin or effectively rule the
country.
President Gemayel must rely on outside political
support to balance his relationship with Syria. We
believe that Gemayel will continue attempting to
outmaneuver Damascus by increasing his political
contacts with European leaders. In the last few
months Gemayel has made a series of state visits to
European capitals designed to portray him as the
legitimate head of the Lebanese state.
Gemayel's maneuver may have bought him some
time. The Syrian regime seems to be taking care to
avoid the appearance of complicity in a possible
overthrow of Gemayel as head of state. Gemayel will
continue to be vulnerable, though, to Damascus's
main contention that by refusing to sign the Syrian-
sponsored agreement, he is violating his role as the
leader of all Lebanese and is representing only the
extreme views of the Christian minority.
Reverse Blank 21
Constitutionally, Gemayel could be forced to resign
only if found guilty of violating the Constitution or of
committing high treason. A two-thirds majority of the
parliament is required to force a resignation. In light
of the fact that parliament has not convened for
months even to deal with routine matters because of
the volatile circumstances in Lebanon, it is unlikely
that it will meet to impeach Gemayel. Any attempt to
muster a two-thirds majority will fail because no
foreign or domestic group will succeed in forming a
coalition that could last long enough to bring charges
against the President.
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The Lebanese Army:
Facing the End of the Road?
The Lebanese Army, its ranks decimated by
desertions of Muslim military personnel, faces its
toughest military challenge?the prospect of
defending the Maronite Christian enclave against an
assault waged by Muslim and leftist militiamen
supported by Syrian artillery and possibly air units.
Since President Amin Gemayel and the Lebanese
Christian community rejected the Syrian-backed
Tripartite Security Agreement last January, the
Army and the Christians have been increasingly
isolated and confronted by Syria and its allies.
Moreover, Damascus has vowed to retaliate against
the Christian Lebanese Forces militia, which it
blames for mid-April bus bombings in Syria that
killed or seriously wounded at least 100 soldiers.
The Army's growing cooperation with the hardline
Christian militia since January has exposed the myth
of its multiconfessional unity?which Army
commander Michel Awn used to maintain was its
raison d'etre?and virtually guarantees that
Damascus will seek vengeance against both groups.
Senior Lebanese Army officials have privately
acknowledged their inability to repulse a determined
Syrian assault, and the US defense attache describes
their attempts to make light of the situation as
"gallows humor."
The Army's Disintegration
Since February 1984, when Muslim militias took
control of West Beirut, most of the Army's Muslim
personnel have succumbed to threats from their
militant coreligionists and have either joined Muslim
or Druze militias or simply stopped reporting for duty.
Today, nearly 90 percent of the personnel attached to
the Army's five "loyal" brigades are Christian. In
contrast, the other four brigades are largely Muslim
and outside the control of Army headquarters.
Ironically, the Army has kept deserters on the payroll
for more than two years lest Muslim militiamen carry
out their threats to block the transfer of funds from
West Beirut?the location of the Ministry of Finance
23
Secret
and the largest branch of the Central Bank?to Army
headquarters in East Beirut so that no one in the
Army is paid.
Muslim officers still in the Army have long been
unresponsive to General Headquarters due to
pressures from the antigovernment militias and
Damascus. Early this year, the Army's Chief of Staff,
Abu Dargham?a Druze?called on the Army to
remain neutral in internal Lebanese conflicts and
avoid fighting with Syrian surrogates. Although the
statement angered Army commander Michel Awn, it
had little effect on the essentially Christian ranks of
the Army.
Estranged Muslim Brigades. At least 9,000 Army
personnel, assigned to the four predominantly Muslim
brigades, are stationed in areas outside the Gemayel
government's control and either are responsive to
Syrian directives or cooperate closely with local
militias. The 1st Brigade is garrisoned in the Syrian-
controlled Bekaa and has received light weapons,
vehicles, and a few tanks from Syria.
The predominately Sunni 2nd Brigade is based in
Tripoli, where it is cut off from Lebanese Army
support and control. It was deployed along major
thoroughfares in that city as part of the Syrian-
brokered security plan that ended the heavy fighting
last fall.
Another brigade outside the Army's control is the
predominantly Shia 6th Brigade in West Beirut. The
brigade's ranks are swollen with Shia Army deserters,
many of whom fight alongside relatives in the Shia
Amal militia or have ties to other Shia groups. For
example, a cousin of the brigade commander, Col.
Abd al-Halim Kanj, is a radical Hizballah cleric in
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Lebanese Army Brigades
Commander
Approximate
Personnel Strength
Confessional
Composition
Area of
Operation
Comments
1st
Col. Ibrahim Shahin
1,500
Shia
Southern Bekaa
Valley
Syrian controlled
2nd
Col. Yahya Raad
1,700
Sunni
Tripoli
Syrian controlled
3rd
Disbanded
4th
Disbanded
5th
Col. Khalil Kanaan
1,800
Christian
Bikfayya and East
Beirut
Loyal to Army
Headquarters
6th
Col. Abd al-Halim Kanj
5,000-6,000
Shia
West Beirut
Close ties to Shia
Amal militia; some
Syrian support
7th
Col. Antoine Sawan
1,300-1,500
Christian
Juniyah area
Loyal to Army
Headquarters
8th
Lt. Col. Kallas
1,500
Christian
Green Line, East
Beirut
Loyal to Army
Headquarters
9th
Col. Ghassan Georges
Ged
700-1,000
Christian
East Beirut
Loyal to Army
Headquarters
10th
Col. Nassib Eid
900-1,200
Christian
Suq at Gharb
Loyal to Army
Headquarters
11th
Col. Amine Kadi
1,100
Druze
Hammana
Loyal to Druze
leader Jumblatt
12th
Probably disbanded
charge of a mosque near Beirut International Airport.
During the recent evacuation of the remaining US
citizens in West Beirut, Awn advised US Embassy
officials against using the 6th Brigade to escort the
Americans to the Green Line because its troops could
not be trusted; he recommended Druze militiamen
instead.
The Druze 11th Brigade in the Shuf area near Beirut
is responsive only to Druze leader Walid Jumblatt. Its
troops, although drawing Army pay, probably have
merged with the Druze militia.
Only remnants of a fifth estranged brigade?the
12th?still exist and are located primarily in Sidon.
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Semi-autonomous Christian Brigades. Although the
"loyal" Christian brigade commanders support Awn,
they complain about the lack of direction from Army
headquarters and have had to become virtually
autonomous in overseeing the operations of their
brigades. Since last summer,
they have assumed
almost complete control of their recruiting, training,
maintenance, and supply programs. Last October, for
example, they complained to Awn about the lack of
spare parts, noting that their brigades had to sell
surplus items to buy spare parts on the open market.
Their procurement problems exposed disorganization
and corruption among logistic personnel and spurred
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efforts to modernize recordkeeping procedures at the
warehouses. Further complicating the Army's supply
situation are its financial difficulties and inability to
locate shippers willing to bring military equipment
into the port of Beirut. For these reasons, its sizable
orders from the United States for spare parts and
various types of vehicles have been on hold since late
1984.
Closer Ties to Hardline Christians
Since January the loyal brigades have worked
increasingly closer with the Lebanese Forces militia,
providing artillery support for each other and sharing
ammunition. The improved relations between the
Lebanese Army and the Christian militia are
widening the rift between Lebanese Muslims and
Christians and may persuade Muslim militias to put
aside their differences, at least temporarily, and
jointly battle the Christians. Muslim militia leaders
also may become more receptive to Syrian
inducements?persistent since the ouster last January
of the pro-Syrian Lebanese Forces chief, Elie
Hubayqa?to launch a major assault on the Christian
enclave. Damascus has told reluctant surrogates, such
as the Druze, that it will increase their arms
shipments if they cooperate in the attacks. Although
cooperation between the Army and the Christian
militia strengthens their collective defensive ability, it
also ensures that any Syrian retaliation against
Lebanese Forces militiamen for the bus bombin s will
also be directed against the Army.
Closer cooperation between the Lebanese Army and
the Christian militia strongly suggests that Awn has
abandoned all hope of a confessionally mixed Army
and instead is embarked upon building an entirely
Christian force. Hubayqa's successor as leader of the
Lebanese Forces is Samir Ja'Ja, whose reputation as a
ruthless Christian militiaman frequently was at odds
with the Army's goals in the past and caused most
Lebanese Muslims to hate and fear him. Under
Ja'Ja's leadership, the militia has sought acceptance
by the Army as a reliable ally in the form of a reserve
or National Guard force,
25
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Damascus Seeks Revenge
Lebanese Christians are waiting for the ax to fall.
Damascus is carefully choosing the time and the
means to force acceptance of the Tripartite
Agreement and to avenge the April bombings. If the
Lebanese Forces' new relationship with the Lebanese
Army strengthens their resistance, Damascus will
increase the military pressure..
On the ground, Syria probably will rely on
surrogate forces to directly engage the Christians and
use its own troops in the area to intensify the artillery
barrage against the Christian heartland. If the
Christians' defense proves stronger than anticipated
or Syrian surrogates fail to cooperate, direct Syrian
intervention in the fighting cannot be ruled out?
particularly if Israel fails to respond militarily to such
unprecedented Syrian moves as airstrikes against
Christian targets.
Before resorting to using its own troops, Syria almost
certainly will try to persuade more powerful Muslim
militias, such as the Druze and the Shia Amal, to join
forces with smaller Syrian surrogates, such as the
Syrian Social Nationalist Party militiamen and
various Palestinian elements. Druze militia officials
have told US Embassy officers in Damascus that
Druze leader Walid Jumblatt firmly rejected Syrian
appeals. Shia Amal militia leaders, already dependent
on Syria for arms and money, did not dare to refuse
Damascus outright and simply failed to respond. Both
militias probably want to avoid incurring casualties in
what they view as an essentially Syrian vendetta.
Syria would have more influence over the Druze were
it not for the militia's new military assistance ties to
the Soviet Union. With approximately 6,000 fighters,
the Druze militia is the best equipped and best
organized Lebanese militia. Within the past year,
Druze militiamen have received military training?
including helicopter flight training?in the Soviet
Union, and Soviet arms shipments have come directly
through the new Druze port at Khaldah rather than
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the former overland route through Syria. The
Khaldah port, opened in June 1985, has a maximum
capacity of 200 tons a day, according to one estimate.
Outlook
Given the present alignment of forces?small
surrogates reluctantly heeding Damascus, more
powerful ones reluctant to become involved, and the
Christians pooling their resources?the predicted
Syrian assault probably will batter, but not destroy,
the Christian forces. Deeply rooted Muslim distrust
and bitterness toward Ja'Ja almost certainly will force
out the few Muslim personnel still active in the Army.
Although the Christian forces may survive the Syrian
assault, their cooperative efforts could serve only to
delay the gradual passage of real power in Lebanon
from the Maronite Christians to representatives of the
Muslim majority.
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Lebanon-Syria:
Drugs in the Bekaa
Farmers in Lebanon's Syrian-dominated Bekaa
Valley, long major suppliers of Middle Eastern
hashish, are turning increasingly to opium poppies as
a cash crop. The increase in narcotics profits resulting
from the shift to poppies is profoundly changing
political and social relations in the Bekaa's largely
Shia Muslim community. Efforts to dominate the
lucrative drug traffic in this area have become
increasingly complex, with Syrian military personnel,
moderate and radical Shia factions, Sunni Muslims,
and Christian militias all playing a part. The
continued political anarchy in the country has
heightened the attraction of drug production and
trafficking as one of the few reliable sources of
income for Lebanese in the area.
Although as recently as last year there were only
infrequent reports that the Syrian Government was
involved in the Lebanese drug trade, we believe
Damascus has increased its role in recent months. The
involvement of Syrian military and civil officials in
Lebanese narcotics demonstrates President Assad's
determination to manipulate competing confessional
factions in the country and illustrates the historical
phenomenon of foreign patronage networks that
dominate Lebanese society. We believe Damascus
remains resistant to international cooperative efforts
to reduce the flow of drugs from the Bekaa and other
areas of Lebanon under its control, largely because
the Syrian leadership is preoccupied with more
pressing political and military issues in Lebanon.
The Bekaa: A Center of Lebanon's Drugs
The recent rise in drug production in the Bekaa?and
specifically the shift from marijuana to opium?stems
from the continued social and political disruption in
the region, in our view, and will continue to grow.
More than half the available agricultural land in the
northern Bekaa was planted in marijuana in 1985,
nluch of the
hashish in that area has now been supplanted by
27
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opium poppies. Press accounts estimate that 80
percent of the Bekaa's agricultural workers are
involved in drug-related agriculture.
Balabakk, the largest city in the Bekaa, is the
headquarters of the loose confederation of Shia
extremist groups known collectively as Hizballah
("Party of God") and is the marketing center for
much of the drugs produced in the region. The Bekaa
has long been the center of Iranian influence in
Lebanon. Iranian military advisers regularly work
with Shia radical leaders in joint training exercises in
the valley. Moreover, the Hizballah general command
is colocated with the headquarters of the main Iranian
Revolutionary Guard contingent at the Shaykh
Abdallah Barracks southeast of Belabakk.
In our view, neither the Iranians working in the Bekaa
nor active members of local Hizballah groups are
deeply involved in the valley's drug business. We
believe Hizballah is largely an urban phenomenon,
and we have no evidence that its organizers have been
actively attempting to influence the flow of drugs
from the Bekaa's farms. Similarly, Tehran's
representatives in the area are actively supporting the
creation of an Islamic state, and involvement in illicit
drug traffic would appear inconsistent with the
conservative ideology they are espousing. We believe
the Iranians and members of Hizballah are
preoccupied with other issues and will continue to
turn a blind eye to the drug situation for the time
being.
According to Lebanese press investigations conducted
in mid-1985 in the main drug-producing areas north
and east of Belabakk, market conditions, the chaotic
political situation, the availability of cheap foreign
labor from South Asia, and the continued Syrian
military presence in the Bekaa combine to make
hashish and opium the most attractive agricultural
alternative in the region. As local farmers told visiting
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Lebanese Army
controlled \
BEIRUT
Tripoli.
Syrian controlled
? Chriallan
Druze and Shia --
controlled
Ort;ze
zicoritr,d11941-:,
?Sidon
Syria
MDR ASCUS
20
Kilometers
703064 (A02660) 8-84
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Lebanese journalists last summer, drug-related
agriculture?and poppies in particular?overcomes
many of the problems that plagued their efforts to
produce crops more traditional to the area, such as
dates, vegetables, wheat, and other grains. Previously,
farmers were responsible for organizing
transportation and coordinating marketing
middlemen to ensure their crops were conveyed
through the maze of military checkpoints between the
Bekaa and major markets in Beirut; drug merchants,
on the other hand, bring cash and scales right to the
fields. Opium is so profitable for the farmers,
they can afford to pay
protection money to the various security and military
forces?Hizballah, Syrian, and Lebanese?to
guarantee that their crops will not be disturbed.
Reports from local press and diplomatic sources
traveling through the Bekaa during the last 18 months
suggest that the burgeoning inflow of narcotics money
is radically changing the traditionally rural and
socially integrated nature of the region. Farmers can
now afford to hire foreign labor to work the fields
during peak periods of planting and harvesting. One
farmer reported that helping with the family drug
business has replaced higher education for most of the
young people of the valley. Another respondent
claimed that drug money makes possible the building
programs and irrigation schemes that Beirut had
promised the region over a decade ago but had failed
to implement. Income from the drug trade has
provided the necessary working capital for some
agricultural families to invest in property in Beirut
and other urban centers or open new businesses in the
valley. One observer noted that the drug business is a
social springboard for village families, enabling them
to overcome decades of neglect by the central
government.
The increased flow of drug-related money into the
Bekaa is a mixed blessing, according to a prominent
Lebanese journalist. He notes that, although it is true
that the sudden influx of easy money has meant local
farmers can afford to send their children abroad for
advanced study, build larger homes, and increase the
overall standard of living in the region, these benefits
have been distributed very unevenly. Large farmers
with access to capital are rapidly coming to dominate
29
the trade. The rapid economic rise of those families
most involved in the drug business is straining the
traditional tribal leadership networks that underlie
the social and political life of the region. Moreover,
greater availability of opium and heroin is causing a
higher level of drug abuse among the rural
population. Editorials in leading Beirut newspapers
speculate that collectively these pressures will
probably prevent integration of the Bekaa with the
rest of the country.
Syria?A Major Player in the Bekaa
Syrian forces have occupied the main drug-producing
regions of Lebanon since 1976, during which time
there have been reports of Syrian involvement in the
production and trafficking of drugs at both the official
and individual level. Diplomatic and academic reports
characterize Lebanon as Syria's unofficial Hong
Kong, noting that Beirut's civil war has failed to
reduce the flow of imported consumer goods smuggled
to Damascus. Diplomatic reports describe the use of
Syrian military vehicles by smugglers carrying
consumer goods and narcotics into Syria. The US
Embassy in Damascus noted late last year that
smuggling of all sorts between Syria and its neighbors
has reached epidemic proportions. Many Syrians have
close family connections in Lebanon and use these
links to facilitate the movement of contraband?
including drugs?between Western Europe and other
Middle Eastern nations.
Syrian military personnel influence the flow of
Lebanese drugs out of the Bekaa through a series of
checkpoints controlling movement west to the coast
and east to the Syrian border, according to the US
Embassy in Damascus. Drugs produced in the Bekaa
are sold to middlemen representing major Lebanese
dealers in Beirut, who arrange for transportation
through the Syrian roadblocks and payment of
necessary bribes at each point along the route and
make transshipment arrangements in a coastal port
under the control of one of the Lebanese confessional
groups. We believe a smaller volume of opium,
hashish, and heroin moves east through a similar
series of middlemen and checkpoints into Syria for
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Marketing Cannabis: Hashish
Lebanese hashish is marketed throughout
Western Europe.
Marijuana (Cannabis sativa L.) grows wild through-
out much of the tropic and temperate regions of the
world. Its active chemical elements are equally effec-
tive eaten or smoked. Most cannabis in the United
States is taken in the form of marijuana, the dried
and crumbled leaves and flowers of the adult plant.
The most potent form produced for the US market
comes from carefully tended unpollinated female
plants specially bred for their high psychoactive
chemical content.
The Middle Eastern and West European markets
traditionally prefer hashish and hashish oil. Hashish
is the drug-rich resinous secretion of cannabis and is
produced from the mature plant through a variety of
techniques. Many Middle Eastern hashish dealers
buy fully grown marijuana plants from local farmers,
store the plants for a period of a few days to two
months, then hire workers to beat the dried plants
with sticks to separate the leaves and flowers from
the woody stems, which are discarded. The material
is then run through an alternating series of rollers
and sieves to produce an increasingly fine powder
which is compressed into the balls, cakes, or other
traditional forms for final marketing abroad.
Hashish oil is a dark, tarry product made by extract-
ing the chemically active ingredients from the canna-
bis plant through repeated distillation. It is popular
in Western Europe, where it is applied to regular
cigarettes. A drop of the liquid is roughly equivalent
to a single joint" of common marijuana.
eventual sale to other Middle Eastern nations and for
further processing and transshipment through the
Syrian ports of Tartus and Latakia.
We believe corruption is endemic throughout the
Syrian Government and that Damascus turns a blind
eye to officials assigned in Lebanon who take
advantage of their positions to demand money to
facilitate drug production and trafficking. Syrian
diplomats, civil servants, and military commanders
have all been identified as links in a chain of
corruption that connects the drugs grown in the Bekaa
with international drug trafficking networks. On
several occasions in 1985 and 1986, Syrian diplomats
Secret
?
were charged by European governments with
misusing diplomatic privileges to traffic significant
amounts of drugs:
? According to press reports, Spanish authorities in
late 1985 charged two Syrian Embassy officials
with heroin trafficking and demanded their
dismissal.
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Bekaa Valley: Poppy capsules are scored in the
morning to collect the opium sap.
? In April 1986 Italian authorities demanded that
Damascus recall three diplomats accused of
smuggling drugs in their private cars from Syria
into Italy, avoiding border searches by claiming
diplomatic immunity, according to the Rome press.
Syrian entanglement in drug production and
trafficking out of the Bekaa is also suggested by
Damascus's reluctance to take active measures to
control the illegal flow. Syrian officials in charge of
the country's antinarcotics program have resisted
meeting with US or other international drug
enforcement officers, have failed to follow through on
proposed bilateral programs, and have denied US
drug and diplomatic officials access to Syrian ports
suspected of involvement in drug trafficking,
according to Embassy
31
have pushed Syrian
antinarcotics administrators to account for
Damascus's failure to restrict the movement of drugs
from Syrian-controlled areas of the Bekaa, the
disingenuous answer given is that drug control is a
domestic Lebanese affair. Civilian Syrian officials
who have attempted to implement antinarcotics
programs have been restrained by local military
commanders, according to US Embassy reports.
Lebanon, Drugs, and Syrian Realpolitik
In our judgment, there is no compelling economic or
political motive for Damascus to attempt to control
the flow of drugs from the Bekaa. Assad and other
senior Syrian leaders seek to maintain a balance
among Lebanon's competing confessional factions
that increases their dependence on Damascus. As long
as drug trafficking out of the Bekaa?and the
corruption of Syrian officials connected with the
checkpoints through which this traffic flows?
continues under the umbrella of Syrian military
dominance and does not threaten to embarrass Assad,
Damascus will turn a blind eye. Syrian military
officials will continue to exploit their involvement in
the drug business in their dealings with:
? The Shia farmers who grow the marijuana and
poppies.
? The Iranian clerical and military leaders in the
Balabakk area.
? The Christians who control the flow of drugs to
important ports along the western coast.
We believe President Assad will continue to treat
Lebanon as a Syrian sphere of influence and that
Syria will try to maintain Lebanese subservience by
professing its support first for one group and then
another. Involvement in the Bekaa's rich drug
harvests is an adjunct?albeit, a largely unstructured
one?to Damascus's overall plan of action in Lebanon
because:
? The foreign exchange the trade brings in is a
valuable subsidy for the Shia factions in the Bekaa
to buy arms Damascus is either unwilling or unable
to supply.
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? Control of the lucrative trade is one more item for
Lebanese confessional factions to compete over, thus
increasing the importance of Damascus as a
mediator in Lebanese domestic matters.
Outlook
As long as civil war and social disruption continue in
Lebanon?and Syria maintains military control of
large parts of eastern Lebanon?there is little
likelihood that drugs will lose their attraction as a
commodity for any of the groups involved in growing,
processing, or trafficking narcotics in the Bekaa.
Drugs will continue to offer the only remunerative
agricultural alternative for increasing numbers of
Lebanese farmers. In our view, the continued
competition for civilian support by confessional
insurgent groups will add to the social and political
uncertainty of the region, thereby increasing the
attractiveness of narcotics to farmers and traffickers
alike. Income from drug trafficking will continue as
an important source of funding for the competing
sectarian factions in Lebanon, and increasing reliance
by these groups on drugs to bolster their finances will
be a further disincentive for them to seek to limit the
illicit traffic. Confessional militias will find it
increasingly difficult to turn their backs on such a
lucrative source of funds, which, because much of its
growing and processing is done by imported labor, has
as an added benefit the freeing of large numbers of
local youths to participate with the militias in the civil
war.
In Lebanon's anarchical political environment,
foreign efforts to implement effective antidrug
programs in the country?and particularly the
Syrian-controlled Bekaa?will continue to fail for the
foreseeable future. There is no competent authority in
either the drug-producing or the drug-trafficking
areas able?or willing?to impose the range of
national programs necessary to limit the continuing
flow of hashish, marijuana, and opiates from
Lebanon.
Drug production and trafficking out of the Bekaa
Valley will remain an integral?if uncoordinated and
unstructured?part of Damascus's involvement with
the competing Sunni, Shia, and Christian groups in
the Bekaa. The income from drug-related activities
Secret
will remain important economically to Bekaa farmers,
many of whom increasingly support radical Shia
Hizballah groups based in the area. As Damascus
seeks to increase its influence with these militant
groups, control over the movement of drugs?if only
in the form of random checkpoints manned by corrupt
military officials?will remain an important pressure
point.
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India: Gandhi Moves Toward
Nuclear Option
Since he became Prime Minister in November 1984,
Rajiv Gandhi has moved gradually toward an Indian
nuclear weapons program. On the basis of Gandhi's
public statements, we believe his views have changed
on:
? The state of the Pakistani program. In his first few
months in office, Gandhi did not discuss when
Pakistan would have a nuclear weapon, but by the
following autumn he was saying a Pakistani nuclear
weapon was only months away.
? The importance of the nuclear issue in Indo-
Pakistani relations. Gandhi once ranked it alongside
other issues such as Pakistan's acquisition of
conventional arms and Pakistani aid to the Sikhs,
but he now sees it as the most important issue.
? India's response. Although Gandhi still maintains
that India neither has nor wants nuclear weapons,
he no longer rules out an Indian nuclear weapons
program.
November 1984?April 1985?No Nuclear Weapons
In his first few months as Prime Minister, Gandhi saw
Pakistani plans to build a nuclear bomb as a clear
threat to India, saying in November that it was a
matter of great concern and in January that it would
make relations between India and Pakistan
"irretrievable." He, however, did not say when he
expected Pakistan to have a nuclear weapon. He
talked about Pakistani "preparations for a bomb"
rather than Pakistan's constructing a nuclear weapon.
In discussing India's relations with Pakistan,
moreover, he tended to give higher priority to other
problems, such as Pakistani aid to Sikh separatists
and Pakistan's acquisition of sophisticated US arms.
Despite his concern, in interviews published in Dawn
of Karachi and broadcast on US television, Gandhi
insisted that India would not build nuclear weapons
and that its program was peaceful.
33
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On 8 April, Gandhi, addressing the lower house of
parliament, specifically linked Pakistan's arms
purchases and its nuclear weapons program, and he
cited the lack of US action to restrain Pakistan. A few
days later, he repeated his concerns in an address to
Air Force commanders. The nuclear threat, in
Gandhi's view, had become more imminent. He told a
British newspaper that he "feared" that Pakistan was
close to a nuclear bomb if it did not have one already.
He, however, continued to reiterate his opposition to
nuclear weapons, telling a Pakistani newspaper that
month that a nuclear arms race would be the "worst
possible threat" to both countries. He no longer
explicitly ruled out an Indian nuclear weapons
program.
May 1985?September 1985?Guaranteeing
India's Security
On 3 May, Gandhi told the upper house of parliament
that, despite Pakistan's acquisition of sophisticated
weapons and its nuclear program, there would be no
compromise on India's security. The next day, in what
the press generally characterized as a significant
change in policy, Gandhi told the All India Congress
Committee (his party's highest body) that Pakistan's
"persistent efforts" to develop nuclear weapons had
forced India to "look into various aspects of this
question and to see what action we should take."
Although Gandhi and his advisers said the press had
distorted the meaning of this statement and that there
was no change in policy, Gandhi continued to speak of
the need to respond to Pakistani progress. In June, in
an interview with Le Monde, Gandhi denied that
India had decided to produce nuclear weapons, but he
admitted that India was considering it and that it
would take only a few weeks or months to become a
"nuclear power." In an interview published in Figaro,
he said India should not produce nuclear weapons
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even if Pakistan did, but he added this was a
"question that had to be discussed so a decision could
be made." The following month, he reiterated India's
opposition to nuclear weapons in an interview with a
leftwing Indian publication but added that "national
security cannot be compromised."
In September he told a Kuwaiti newspaper that
Pakistan has produced "a lot" of enriched uranium
that could only be going into weapons and that,
although India did not want to develop nuclear
weapons, if Pakistan acquired nuclear arms, "our
security imperatives would compel us to review our
options."
Many of Gandhi's statements implied that the nuclear
issue had become the most important problem
between India and Pakistan. On 18 June, in contrast
to his statements a few months earlier, he told Indian
reporters that US arms supplies to Pakistan did not
endanger India. What really concerned India was
Pakistan's nuclear program. In a radio address in
August, he clearly gave the nuclear problem first
place, characterizing Pakistan's nuclear program as
the "one thing" blocking better relations.
October 1985?No Bomb at This Time
In early October Gandhi told a US magazine that
India had "proof" Pakistan was making an atomic
bomb. On 8 October, in a talk to the Indian National
Defense College, he reiterated the dangers of nuclear
weapons but tied these dangers to countries, such as
Pakistan, with violent changes of government. Gandhi
may have been implying that weapons would be safe
in responsible Indian hands. In an interview published
in a British newspaper, Gandhi said that Pakistan
could have a bomb in a matter of months, but he
repeated that India did not want to build a bomb of its
own.
At a press conference on 11 October, when asked to
be specific about the Indian response to a Pakistani
weapon, Gandhi avoided a direct answer. "We have to
worry about our security, and there is no question of
allowing New Delhi or any other city to be flattened
out." Later in the press conference he denied that he
had ever said India would need to make a nuclear
Secret
bomb if Pakistan made one. In an interview with a US
magazine, however, he said that India's decision
against building a bomb was "not irrevocable."
November 1985-April 1986?The Nuclear Option
On 1 November, Gandhi took another small step
toward a nuclear weapons program, denying to a press
conference in New Delhi that India was developing
weapons "at the moment" but adding "I am not
closing the option." In November, at the dedication of
a nuclear reactor, Gandhi said there was no need to
make a bomb "at present."
In December, in interviews with Asia Week and
Japanese television he again reiterated his opposition
to nuclear weapons, calling South Asian deterrents
"extremely dangerous" and noting that India does not
want to build a bomb even if Pakistan does. At about
the same time, however, he told reporters in New
Delhi that, if Pakistan develops nuclear weapons,
"there is no reason for India to do nothing about it.
When it becomes necessary, we will inform the
people." On 12 December, Rajiv told reporters that, if
Pakistan continues working on a nuclear bomb, India
would "not hesitate to make a decision."
A review of the Indian press indicates that Gandhi
said little about the Pakistani nuclear program in the
early months of 1986. Questions from newsmen dealt
primarily with other issues such as the worsening
situations in Sri Lanka and India's Punjab State.
Gandhi may also have wanted to minimize the issue
while an effort was under way to improve relations
with Pakistan. In December the two countries had
reached a preliminary agreement not to attack each
other's nuclear facilities, raising hopes of a wider
nuclear agreement. In remarks to the upper house of
parliament on 5 March, Gandhi's emphasis was on
progress in normalizing relations rather than on
contentious issues between the two countries.
In a review of defense policy for the lower house on 8
April, however, Gandhi again discussed the nuclear
issue. He told the body, as he had a year earlier, that
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Pakistan's nuclear weapons program continued, but
this time he added that, if Pakistan acquires a nuclear
weapon, India will have to seriously consider its own
option. Although India wants a peaceful nuclear
program, he said, it cannot remain complacent if the
security environment changes.
Gandhi and Nuclear Weapons
Gandhi's statements on nuclear weapons have several
purposes. By raising the prospect of a nuclear-armed
India, he almost certainly hopes to dissuade Pakistan
from the pursuit of nuclear weapons and to encourage
the United States to take stronger action to restrain
Islamabad. At the same time, by promising that
India's security would be maintained, he has tried to
cope with the fears of the Indian public and the
demands of politicians for an Indian deterrent.
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Indicators of an Indian Nuclear Weapons Program
If India were to initiate a major nuclear weapons
program, we would expect to detect the following:
? Testing of the high-explosive components of
nuclear weapons.
? Growing contacts between the Department of
Atomic Energy and the military to establish
weapons requirements and characteristics and to
administer a hardware development program.
? Stepped-up efforts to procure abroad specialized
materials, components, and equipment for weapons
production and for the civil nuclear program in
anticipation of a foreign nuclear suppliers' boycott.
? Reassignment of key personnel within the nuclear
establishment to new duties or locations.
? A nuclear test to provide new technical data or
more conclusive proof that technical development
objectives had been achieved.
He does not appear to have embarked on an active
campaign to influence either Indians or foreigners. He
has rarely initiated discussion of the issue. His
statements have almost always come in response to
questions from newsmen or in broad reviews of
defense or foreign policy in which it would have been
difficult to omit the subject. He has been cautious in
formulating his answers. He has, for example, said a
number of times that India would be forced to make a
decision, but he has never explicitly indicated that the
decision would be to build an Indian nuclear weapon.
At times he seemed to be avoiding the issue, especially
during such periods as early 1986 when efforts to
negotiate differences with Pakistan were under way.
We believe that Gandhi's public statements are a
fairly accurate, although more cautious, reflection of
his private assessment of the nuclear situation
Gandhi probably opposes a nuclear weapons program
for India in principle but?presumably because of
intelligence reports of Pakistani progress toward a
nuclear weapon?believes India may, nevertheless,
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have to choose the nuclear option. Given Gandhi's
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discuss the nuclear option explicitly, India might be
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Gandhi has said several times that it would take India
only a few months to produce a nuclear weapon. In
our view, it would take considerably longer unless
significant preliminary work had already been done.
It may be that, when Gandhi speaks of keeping the
nuclear option open, he includes activities such as
design work or even the fabrication of some
components of a bomb. If so, when he denies that
India has a nuclear weapons program, he may mean
only that India has not begun constructing deliverable
nuclear weapons.
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India: Declining Professionalism
in the Indian Army
A recent open letter from the Chief of Army Staff to
all Indian Army officers suggests that military
professionalism has declined to unacceptable levels.
The Chief of Army Staff's admonitions against
careerism, opportunism, and sycophancy probably
reflect Rajiv Gandhi's priorities as Defense Minister
and a belated recognition by senior military officers
that India's economic and social problems are having
a detrimental impact on the Army. The Chief's letter
fails to mention an emerging pattern of violence
perpetrated by Indian Army personnel that further
calls into question the image and role of the Army as
an apolitical and professional institution.
Sundarji stressed self-improvement as the principal
remedy for these ills, calling upon each officer to
"strive for excellence." Specifically, he advocated
permitting maximum initiative from junior officers,
encouraging new ideas, cultivating esprit de corps in
all units, and developing an active technical curiosity.
He also endorsed proposals for establishing a
graduated pay scale for all officers based on time in
grade and for increasing the standing of military
officers in the government's warrant of precedence
that collectively ranks military and civilian
government positions.
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Sundarji's letter was surprising for its frankness and
contrasted to the bland utterances of recently retired
Chief of Army Staff A. Vaidya. Indian Army general
officers have traditionally been loath to publicly
criticize their service. Most have maintained that the
Indian Army is a highly professional military force on
a par with the armies of NATO and the Warsaw
Pact.
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Motives
We believe Sundarji had several motives in writing
the letter. In our judgment, he wanted to reassure the 25X1
public that something is being done about problems in
the Army's officer corps. Over the last two years
Indian newspapers have carried numerous stories
about corrupt practices by recruiting officers. Officer
leadership has also been highlighted in press coverage
of last year's judicial proceedings against the
mutineers from at least six Sikh battalions in 1984
following Operation Bluestar. Lenient sentences were
given to most of the 2,700 "deserters," while their
officers were severely punished for having failed to
inform and control their men,j
We believe Sundarji's letter can be taken at face
value, encouraging reform for the sake of Army
professionalism. He echoes the concerns of middle-
grade Indian Army officers, who have been even more
frank in voicing their concerns in Indian Army
publications.
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background of recent recruits born after independence
with the British colonial culture that still dominates
the Army. Moreover, they identify Army careerism as
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the inevitable result of rapid industrialization, a
corrupt political system, and an educational system
that is adrift.
Finally, we believe Sundarji is using this issue to
achieve bureaucratic and personal objectives. By
bringing the Prime Minister's anticorruption drive
into the Army, Sundarji may hope to curry favor with
Gandhi and gain Rajiv's support on other military
issues, such as the creation of an Army aviation corps.
He may also be angling for a high government job
after he retires in 1988.
most military chiefs of staff have
made it a point to demonstrate to their civilian
superiors that they are reliable, steady, and worthy of
a high government assignment?an ambassadorship
or state governorship?after they retire. Sundarji's
letter, which mimics popular Western management
concepts and restates standing Army initiatives but
suggests no radical policy changes, is probably an
attempt to show that his thinking is in tune with
Rajiv's campaign to eliminate government
inefficiency.
describe Sundarji as the most
brilliant senior officer in the Indian Army and as
having friends in high places. He led the battalion
that stopped Pakistan's initial diversionary thrust into
the Rann of Kutch in 1965 and, as Western Army
commander in 1984, oversaw Operation Bluestar.
Sundarji served as Vice Army Chief of Staff before
assuming his present duties this year. In his most
recent capacities, he has approved, and we speculate
helped engineer, the meteoric rise of Lt. Gen. K.
Hazari, now Vice Army Chief of Staff, whose wife is
the sister of Minister for Internal Security Arun
Nehru and a cousin of Rajiv Gandhi.
Effect of the Letter
Whether Sundarji's letter succeeds in arresting the
decline in Army professionalism is open to question.
Indian Army officers are notoriously subservient to
directives from higher-ups and may respond to
Sundarji's directives if they believe their careers
depend on it. Unless Sundarji backs his self-help
suggestions with surprise inspections and changes in
top Army personnel, he probably will not get results.
Secret
We believe Sundarji's letter may serve to head off
civilian attempts to clean up corruption and
malfeasance in the Army. Open Indian sources
indicate that at least 60 Army and paramilitary
officers are under investigation by the Finance
Ministry for income tax fraud resulting from black
money operations and the payment of commissions
from domestic and foreign arms manufacturers.
These investigations represent a change in policy,
Previously the
Army, Navy, and Air Force had been allowed to
police themselves. Two Navy rear admirals, for
example, were recently given training assignments,
removing them from the main promotion track, for
having been involved in improper financial dealings as
project managers for the $350 million purchase in
1981 of four West German Type 1500 submarines,
according to a reliable defense attache source.
Sundarji may fear that, unless the Army
demonstrates that it is taking steps to clean up its act,
civilian investigations and scrutiny of the Army will
increase.
that these and other abuses stemming from the
excessive regulations governing the private lives of
officers are fairly common. In one case, an Army
officer inherited several parcels of land, some of
which he sold, undervaluing the bill of sale to save on
taxes. He spent this money on consumer appliances,
informing his superior?under a rule covering all
purchases over 500 rupees ($42)?that the money
came from personal savings. Other malfeasances,
including falsifying travel vouchers, are justified
because "everybody does it."
Less Than Full Disclosure
A notable omission from Sundarji's otherwise candid
assessment are the growing incidents of violence
perpetrated by Army enlisted men and officers on the
civilian populace. have noted
the development of a "we-they" attitude in instances
where the Army has been called in to maintain civil
order?over 400 times since 1980. Last year, for
example, four Army officers, including a battalion
commander, faced charges of looting in Amritsar
following the 1984 raid on the Golden Temple. Other
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Army personnel in Patiala were accused of illegally
holding and torturing 60 students. More recently,
incidents of Army violence against civilians not
associated with internal security operations have
begun to surface. According to open sources:
? In October 1985, Army troops raided a police
station in Kerala to free a fellow soldier arrested for
interfering in a customs raid. Nine policemen were
injured after Army officers failed to gain the release
of their man, and the station was attacked by three
truckloads of soldiers.
? Last month, 100 soldiers participated in a riot in
Assam after their train was stopped by striking
students. In addition to attacking the students, the
Army men assaulted train personnel and damaged
other civilian property before four senior officers
arrived and restored order.
We believe these incidents point to a growing
arrogance on the art of some Arm ersonnel towa d
civil authority.
this arrogance stems, in part, from the cloistered
existence they experience while living on base with
little contact with the civilian community except when
they are called to restore order.
This trend, in our judgment, does not threaten civilian
control of the military. It constitutes, however, a more
significant crack in the facade of the professional
Indian military than those problems identified by
Sundarji. He probably believes that this problem will
abate if the Army is used less frequently in controlling
civil violence. We believe, however, that his
unwillingness to address this problem in his letter
demonstrates the limits that even India's "most
professional officer" respects in challenging the
Army's image as a professional force helping to
maintain India's democratic system.
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India-Pakistan: Gradual
Progress on Economic
Relations
Indo-Pakistani economic relations are likely to
progress at a slow but steady pace for the remainder
of the year. Although official support?particularly
from the top leadership?provides the momentum for
improved relations, bureaucratic resistance and
Pakistani business community opposition are likely to
prevent rapid improvement. In the near term, public-
sector commodity trade, improved communications,
and cooperation on issues of mutual interest in
international economic forums are the most likely
areas for progress. Over time, these economic
initiatives will help improve bilateral relations.
Growth in private-sector trade will be hampered
unless Pakistan increases its list of tradeable items
and India provides trade and tariff concessions.
Checkered Past
Endemic hostility between the two states and
Pakistani fears of Indian economic domination?
India's industrial output is more than five times larger
than that of Pakistan?have hobbled economic
relations. At independence, although Pakistan was
richly endowed with agricultural land, most of the
subcontinent's industrial base remained in India. As a
result, Pakistan placed severe limits on crossborder
economic relations to protect its fledgling domestic
industries.
After the Simla agreement in 1972, Pakistan and
India resumed public- and private-sector trade.
Within a few years, however, an adverse trade
balance with India led to increased protectionist
sentiment in Pakistan and the suspension of private
trade in 1977. Since then, official crossborder trade
has averaged only $28 million a year, conducted
through public-sector firms, with the balance running
in Pakistan's favor.
New Initiatives
Last year, Pakistani's then Finance Minister
Mahbubul Haq proposed a series of initiatives to
' The Simla agreement requires India and Pakistan to settle
outstanding disputes bilaterally.
41
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revive Indo-Pakistani economic relations. After the
meeting between Pakistan's President Zia and India's
Prime Minister Gandhi in December, during which a
series of bilateral meetings were agreed to, an
economic and trade agreement was negotiated in
January with the following goals:
? A doubling of public-sector trade.
? Gradual resumption of private-sector trade by
Pakistan.
? Increased shipping, rail, and air links.
? Establishment of joint business federations and
ventures in each other's country.
? Increased "people to people" and ministerial
contact.
Government and Business Response
The top leadership in both countries strongly supports
increased economic ties as a means of improving
bilateral relations.
Gandhi, Zia, and Pakistani Prime Minister Junejo
have repeatedly reaffirmed their interest in increased
trade and better economic relations.
Gandhi promised that politics would
not get in the way of improved economic relations and
that New Delhi would accept a pace comfortable to
Islamabad.
Some middle-level government officials in both
countries, however, are more cautious about the
chances of improving economic relations. Although
most Indian officials approve of the new economic
initiatives, they are skeptical of Pakistani intentions,
according to Embassy reports. We believe the Indians
have pushed for freer crossborder trade and a greater
role for the private sector to test Islamabad's
commitment.
In our view, a powerful segment of the Pakistani
bureaucracy?led by President of the Senate and
former Finance Minister Ghulam Ishaq Khan?
opposes improved economic relations with India.
These officials argue that free trade would result in
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MILUON US DOLLARS
120 -
100 -
80 -
60 -
40 -
20 -
j_
1976
INDO?PAKISTANI TRADE 1976 TO 1985
1977
1978
1979
Ii
1980 1981
FISCAL YEAR
Indian dumping, a quick deterioration in the trade
balance, and disruption of Pakistani industries. We
judge that opposition from this group to Mahbubul
Haq's "fast forward" approach to better Indo-
Pakistani economic relations was one of the reasons
for his dismissal from the Finance Ministry earlier
this year.
The business community in India generally favors
improved economic relations. Indian businessmen
probably view Pakistan as a potentially important
market, given its proximity, the large and lucrative
crossborder smuggling trade, and strong economic
performance over the past few years. Some observers
believe that India's low prices, minimal transportation
costs to Pakistan, and reasonable quality goods such
as tires, auto parts, engineering manufactures, and
farm equipment?could supplant expensive Japanese,
US, or European imports in the Pakistani market.
Secret
Jj
1982 1983
1984
1985
Legend
PAK IMPORTS
MI PAK EXPORTS
In Pakistan, however, business commmunity opinion
is divided. The Consulate reports that some well-
established Pakistani manufacturers in Karachi fear
Indian competition. On the other hand, Pakistani
traders?who stand to profit from Indian imports?
welcome the opportunity to expand trade ties.
Moreover, some textile manufacturers and Lahore-
based small-scale industrialists believe their goods are
competitive in India and hope to export, according to
Consulate reporting.
Slow Progress
The initial euphoria earlier this year over renewed
economic links has given way to more sober
expectations. Indian accusations of Pakistan's alleged
role in training Sikh extremists and the demotion of
the economic initiative's mentor, Mahbubul Hach
have soured relations and slowed momentum.
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Nevertheless, Embassy reporting indicates Islamabad
and New Delhi seem determined to improve economic
relations and have scheduled an economic joint
commission meeting for later this month.
Initial progress on increasing bilateral trade has been
slow. Trade figures are not yet available, but the press
reports that New Delhi and Islamabad have recently
signed a $13 million cotton-for-wheat barter deal.
Pakistan hopes to trade cotton, steel products, and
fertilizers for Indian wheat, iron ore, and chemicals.
Pakistan's resumption of private trade has been
limited to the same items traded by public-sector
firms. The press reports that the 42-item list includes
a diverse range of Indian commmodities and products
such as tea, wood, and spices, as well as fire engines
and potato diggers?items that are not a threat to
Pakistani industries. Islamabad has indicated that the
list would eventually be expanded to 200 items,
according to Embassy reporting.
Islamabad and New Delhi also discussed increasing
cooperation in international and regional economic
organizations and sharing agricultural and economic
planning techniques.
India proposed, and Pakistan agreed, to coordinate
negotiating positions in GATT and other multilateral
trade forums. Over the past few months, India sent a
team of farm experts to Pakistan, a delegation of
Indian businesswomen was feted in Pakistan, and
high-level officials have shared views on tax reform
and economic planning, according to press and
Embassy reports.
Outlook
Indo-Pakistani economic relations will continue to
evolve, but progress is likely to be incremental and
slow. Pakistan, as in the past, will determine the
direction and extent of the economic relationship.
Although events in the subcontinent?unrest in
Punjab and military moves in Kashmir?could derail
improved economic relations, we expect self-interest
in both countries to work toward expanded public-
sector trade links, improved communications, and
efforts to coordinate bargaining positions on textiles,
Reverse Blank 43
trade, and monetary reform in international economic
forums.
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Limited knowledge of each other's markets, shoddy 25X1
goods, import quotas, and high tariffs are likely to
impede rapid private-sector trade growth. Over time,
proposed improvements in telecommunications,
increased air service, and the reopening of a rail link
between Karachi?Pakistan's industrial center?and
Bombay should enhance opportunities for increased
trade. Impending balance-of-payment problems in
both countries could lead to a rupee trade 25X1
arrangement stimulating crossborder trade and saving
on scarce foreign exchange. If Islamabad increases its
private trade list to more than 200 items and New
Delhi alters its cumbersome import regulations and
tariffs to ease the way for Pakistani imports,
opportunities for private-sector trade will be
enhanced.
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Sri Lanka: Mahaweli Land
Resettlement?The Impact
on Communal Rivalry
Prospects for settling Sri Lanka's ethnic conflict are
complicated by the competition between Tamils and
Sinhalese for allotments of land under the
Accelerated Mahaweli Development Program
(AMD)?by far the largest land development project
in the country. At stake is apportionment of the newly
irrigated land in the sparsely populated dry zone of
Eastern Province that is being developed to relieve
population pressure in the wet zone and increase the
country's agricultural production.
Tamils strongly oppose land apportionment in Eastern
Province by the Sinhalese-dominated government.
Tamil leaders complain that the government has
discriminated against Tamils in allotting land in the
adjacent North Central Province, and they fear that
land allotments to Sinhalese in Eastern Province will
erode the Tamil plurality there. This plurality is
essential to Tamil separatist demands for a Tamil
state within Sri Lanka that would include the Eastern
and Northern Provinces?claimed as traditional
Tamil homelands.
Colombo's handling of the Eastern Province
allotments will indicate whether it is willing to make
concessions to dampen the ethnic conflict or is
determined to extend Sinhalese political control to the
Eastern Province at the risk of continued fighting.
Resettlement data obtained by the US Embassy
support the Tamil claim that Colombo has favored
Sinhalese settlers in allocations of AMD land. We
suspect that the government will continue that
practice in Eastern Province to gain political control,
despite a purported government proposal to settle
large numbers of Tamils there as a means of
redressing allotment imbalances in the AMD
program.
Discrimination
As late as September 1985, President Jayewardene
reiterated Sri Lankan Government policy that land
allotments in national settlement programs would be
apportioned on the basis of overall national ethnic
45
ratios. Accordingly, Sinhalese would receive 74
percent of the allotments; Tamils, 18 percent; and
other ethnic groups, the remainder.
In the past, two land allocation schemes attempted to
settle Sinhalese and Tamils on AMD land: "Cheek by
Jowl" and "Checkerboard." In the first scheme,
"Cheek by Jowl"?implemented in Irrigation System
H in North Central and Northwestern Provinces?
Tamil and Sinhalese allotees were mixed along the
same irrigation canal. In the second scheme,
"Checkerboard"?implemented in the portion of
Irrigation System B that is also in North Central
Province?Tamil and Sinhalese allotees were settled
in separate clusters of land allotments surrounding
hamlets providing commercial and social services.
Neither scheme succeeded in integrating Tamils and
Sinhalese because the government financed and
armed the Sinhalese settlers, who outnumbered and
intimidated the Tamils, forcing many of them to
leave. In addition, according to a US Embassy
official, Tamil villagers interviewed in Irrigation
System B complained of "developmental problems,"
such as a lack of irrigation water and shortages of
wells, which made occupation of their allotments
virtually impossible.
According to data from the US Embassy on
resettlement through June 1985, most of the AMD
land opened for settlement is occupied by Sinhalese.
In Irrigation System H, where all of the allotments
have been issued, 93 percent are occupied by
Sinhalese settlers. Furthermore, in the other three
irrigation systems where settlement has begun,
Sinhalese occupy considerably more than the 74
percent of allotments suggested by the government's
formula.
According to the Embassy report, the Tamil United
Liberation Front asserts that this outcome was
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Pakistan
Sri Lanka
India
*
NEW
DELHI
Tamil-inhabited area
Sinhalese-inhabited area
Limit of Mahaweli Irrigation Program
Tea-growing area
o 50 Ktlometers
60 Miles
Irrigation Stage of
Sxstem Development
Resettlement completed
B, C, G Development and
resettlement in progress
A, D, E Development not started
Trincomalee
India
Sri
Lanka
Bangladesh
The acclerated Mahaweli Development
Program is composed of seven
irrigation systems (A-E and G-H) in
Sri Lanka's dry zone of Uva,
Central, North Central, and Eastern
Provinces. The irrigation systems are
subdivided into nearly 115,000 allotments
for resettlement.
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orchestrated by the government in violation of its
allotment formula and fears that this pattern of
discrimination will continue as AMD land in Eastern
Province is opened for settlement. Tamils may be
justified in their skepticism about the government's
adherence to its allocation formula. Attempted
Sinhalese settlement in Eastern Province has
precedent. According to the Embassy report, a
powerful Buddhist leader, allegedly with the
connivance of government officials, sought
unsuccessfully in 1983 to settle illegally up to 45,000
Sinhalese squatters.
New Proposal
To assuage Tamil grievances concerning the
inequitable allocation of AMD land and to respond to
Indian pressure to resolve the ethnic crisis through
political means, the government has purportedly
advanced a new proposal for land settlement.
According to the US Embassy, in mid-April Sri
Lankan Foreign Minister Hameed delivered a
negotiating proposal to New Delhi that abandons the
current allotment formula in favor of granting 50
percent of land allotments to Tamils in settlement
programs implemented in Tamil-majority areas. This
appears to be a concession designed in part to fulfill
the non-Sinhalese quota of allotments in the AMD
program to date.
The right bank of the Maduru Oya River?that
portion of Irrigation System B contained within
Eastern Province's heavily Tamil Batticaloa
District?is the only portion of AMD land that could
be developed in the near future. Whether the
government implements its new proposal in this area
will be indicative of its strategy for future land
settlement in northern Sri Lanka over the next few
years. Because it is the Tamil preponderance in
Batticaloa District that provides the Tamil plurality
in Eastern Province, the government could use
Sinhalese settlement on the right bank to break the
Tamil claim to the province.
The future of the government's new proposal for the
right bank may be complicated by the decision of
some donor countries to withdraw funding from Sri
Lanka, as Canada and Saudi Arabia have done. If
this were to occur, Colombo could decide to leave the
47
Table 1
Sinhalese Allotments of AMD Land
Irrigation Number of
System Allotments
Issued
(percent)
Occupied by
Sinhalese (percent)
37,483
17
93
22,000
44
99
2,900
27
100
23,005
100
93
right bank undeveloped for the near term.
Jayewardene, however, probably believes that the
continuation of the AMD program is important to the
longer term economic vitality of his country, and he
would be likely to lobby hard for continued funding,
insisting that allotment imbalances will be redressed
in future development.
Two Scenarios
Assuming funding was available, we see two possible
scenarios for the future of the right bank. In the first
and less likely scenario, the Sri Lankan Government
would work with Tamil leaders to implement a 50-
percent settlement of Tamils on the right bank. This
scenario offers at least a partial solution to the issue of
inequitable allocation of AMD land and could serve
as a first step in settling the broader ethnic conflict.
We believe, however, that Tamil leaders will not
accept this proposal, because it enables the
government to settle up to 50 percent Sinhalese and
erode the Tamil majority in Batticaloa District.
Furthermore, Tamils could argue that a much larger
percentage is needed to redress past inequities in
AMD land apportionment. On the other side, we
doubt that the Sinhalese-dominated government,
driven by pressure from Sinhalese in the heavily
populated wet zone, would abandon its efforts to
maximize Sinhalese settlement in Eastern Province as
a means of gaining political control there.
In a second scenario?more likely, considering
Mahaweli resettlement practices to date?the
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Table 2
The Ethnic Mix in Eastern Province
Percent
Tamil Sinhalese Other
Eastern Province 42 25 33
Batticaloa District 72 3 25
Trincomalee District 36
33 31
Amparai District 21 37 42
government would encourage large-scale Sinhalese
settlement on the right bank. Successive governments
in Colombo have promoted the idea of Sinhalese
settlement in the east for reasons ranging from the
scarcity of land in the densely populated wet zone to
the desire by the government to weaken Tamil claims
to Eastern Province. Although previous efforts to
settle Sinhalese in Eastern Province have failed
because of reasons ranging from weather conditions to
Tamil insurgency, the idea of Sinhalese settlement in
Eastern Province remains popular among some
government officials.
Outlook
Increasing population pressures in the wet zone will
fuel the Sinhalese-dominated government's efforts to
find more arable land for Sinhalese on AMD land.
Because a large portion of AMD land yet to be
developed is contained within Eastern Province?
claimed by the Tamils as traditional Tamil
homeland?and because Colombo will probably
continue to use Sinhalese settlement to wrest local
political control from the Tamils, we believe that
efforts to settle newly irrigated AMD land will
continue to ked communal strife. Although some
Tamil separatist leaders may accept less than a
separate Tamil state, we believe they will persist in
fighting to maintain their plurality in Eastern
Province in a bid to achieve their larger goal of
political recognition of a traditional Tamil homeland.
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Sri Lanka: Colombo's Faltering
Counterinsurgency
The Sri Lankan Government's counterinsurgency
effort is stalled despite a substantial military buildup,
reconfiguring of the national security bureaucracy,
and gestures toward political accommodation with
Tamil separatists. The security forces' basic
shortcomings?poor organization, training,
leadership, and intelligence?remain unaddressed,
and they continue to lack a cohesive
counterinsurgency strategy. Moreover, Colombo's
ability to appeal to the loyalties of the disaffected
Tamil populace is weak. The continuing
ineffectiveness of the government's effort confronts
Colombo with both a growing insurgency and the
threat of a hardline Sinhalese backlash.
Government Strategy
Emboldened by its larger arsenal and with peace talks
stalled, the government began early this year to press
for a military solution. The security forces this year
have been out of garrison searching for insurgents
more frequently than in the past and have even begun
combining some ground operations with airstrikes.
Still, Colombo's indiscriminate attacks in the
Northern Province focused largely on civilians, as
opposed to better concealed and more formidable
insurgent targets, and have failed to make much
headway. The government is now shifting its efforts to
the Eastern Province and is trying to keep the
insurgents there from gaining ground.
The government's counterinsurgency strategy is
uncoordinated and, in our judgment, poorly thought
out. Colombo has favored a military buildup at the
expense of realistic political and economic initiatives.
The main features of the government's program are:
? A 50-percent leap in military spending, to $348
million, and a 20-percent jump in the number of
military personnel, to about 30,000, over the past
year. Most of the money has been spent on arms and
equipment.
49
? Reconfiguring the national security bureaucracy to
promote more efficient military operations.
Government actions include naming a Minister for
National Security and forming the Joint Operations
Command and the National Intelligence Bureau.
? Settling Sinhalese villagers in Tamil regions to
reduce Tamil dominance in parts of the east and
north.
? Holding out promises to Tamil dissident groups of
political concessions.
? Efforts to garner domestic support in contested
areas.
? Efforts to gain international support for the
counterinsurgency.
Slim Chances for a Military Solution
In our judgment, the government will not be able to
effect a military solution to the insurgency because
the security forces are incapable of pursuing effective
counterinsurgency operations. A successful
counterinsurgency generally requires aggressively led,
well-trained, mobile forces supported by a flexible
logistic network and timely, accurate intelligence. The
Sri Lankan military, in contrast, is poorly trained,
undisciplined, and has mediocre leadership,
Colombo's recent military buildup
has augmented some of the security forces' resources,
such as manpower, ammunition stockpiles, and fast
patrol boats, but it does not address their fundamental
weaknesses.
Equipment. The government has concentrated its
efforts on acquiring arms and equipment. But its
procurement program has no coherent focus and
remains subject to the caprice of corrupt government
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Colombo's Proliferating Security Forces
Colombo has added to the confusion among the
security forces regarding their roles and missions by
forming several new paramilitary organizations. The
Army is currently augmented by the Special Task
Force (STF), raised by National Security Minister
Athulathmudali as an elite counterinsurgency unit;
the Home Guard, an official paramilitary force; a
National Auxiliary Force (NAF); and the police. The
government last year also proposed creating a
National Armed Reserve, although it is likely to
remain mostly on paper for the foreseeable future
because of serious problems in training and
equipment. Colombo has begun arming Muslims and
Sinhalese in Tamil areas as a grassroots
counterinsurgency force. The proliferation of security
forces has contributed to the rising of random
violence?armed settlers and Home Guardsmen are
being increasingly suspected, even by the government,
in recent shootings of Tamil civilians.
spending practices.
government officials charged with arms
purchases often decide what weapons the security
forces need on the basis of whether they can collect
commissions on the total contract value from various
vendors, a practice so widespread among senior
officials that it has been dubbed "the chocolate
game."
As a result, the military is armed with a hodgepodge
of weapons that complicate its primitive logistic
system. As examples, recent news film shows an
Army squad armed with four different types of rifles
of two different calibers. The Navy has ordered three
types of patrol boats in the last year,
two Chinese-made patrol boats idle in
Trincomalee harbor, probably because of spare parts
problems.
Secret
Much of the military's new arsenal is not very useful
for fighting a guerrilla war. The Army is buying
antiaircraft guns and antitank weapons that have
little if any utility in a low-intensity guerrilla war.
The Air Force has been buying light attack aircraft,
which need landing strips and will be difficult to
deploy and support in the field. Colombo only recently
began acquiring armed helicopters, which can operate
out of unprepared forward areas, maintain a longer
time over target, and give more accurate fire.
the government has begun to
realize that light attack aircraft are of only limited
usefulness in killing insurgents and generate adverse
publicity by inflicting indiscriminate civilian
casualties
Training. Military training has received less emphasis
than arms acquisitions. The security forces' main in-
country training programs are small and conducted
by a British firm with at least 18 advisers in Sri
Lanka. They fly for the Air Force and conduct pilot
training as well as instruct nearly all of the Special
Task Force (STF) in what we believe are short classes
in counterinsurgency tactics for all personnel or more
extensive instruction for cadre.
Sri Lankan military personnel also attend courses
abroad, but only the Pakistani programs appear to
provide training applicable to counterinsurgency.
Pakistan began training
approximately 360 Sri Lankan junior officers and
Home Guardsmen in basic infantry courses last year
the Sri Lankan National
Security Council decided in March 1986 to send an
additional 250 military personnel, mainly Army
enlisted men and noncommissioned officers, every two
weeks to Pakistan for four- to six-week courses. These
programs may represent the only rigorous infantry
training the security forces receive, training that, in
our judgment, is crucial to the development of
effective counterinsurgency units. The continuing
indiscipline in the security forces suggests that this
training has not yet had much impact on units in the
field.
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Personnel. The lack of training and discipline is
compounded by poor leadership and ethnic
parochialism. The military suffers from the
entrenchment of Sinhalese senior officers chosen more
for their political reliability than for their military
expertise. The junior officer corps, composed largely
of young Sinhalese with hardline views toward the
communal conflict, is among those groups pressing
hardest for a military solution. The rank and file are
mostly Sinhalese peasants who often see the conflict
in racial rather than political terms.
Reorganization. Colombo has restructured its
national security bureaucracy to mold an efficient
high-level organization for waging counterinsurgency,
but the effort so far has failed. The creation in 1984
of the post of Minister for National Security has
succeeded mainly in introducing to the Cabinet
another voice in the cacophany of advice on the
communal conflict and has not effectively
concentrated on strategic planning and direction for
the counterinsurgency. The Joint Operations
Command (JOC), created in 1985 to provide
centralized coordination for security force operations,
is experiencing problems in filling that role.
friction between
the JOC and the services is serious enough that the
Army commander will retire this August rather than
continue to tolerate the JOC's interference in day-to-
day Army operations.
he JOC commander is frustrated at the
Navy's failure to block the flow of insurgents and
materiel between India and Sri Lanka
Losing Hearts and Minds
The nonmilitary dimensions of Colombo's
counterinsurgency strategy also have proved inept.
The government continues to hold out promises of
political concessions to the Tamils, but only on
conditions it knows they are unlikely to accept?
renunciation of both violence and the union of the
51
Strength of Sri Lanka's Security Forces a
Unit Strength
Army 17,000 (active)
12,000 (volunteer force)
8,000 (reserve)
Navy 3,900 (active)
500 (reserve)
Air Force 3,400 (active)
1,500 (reserve)
Special Task Force 3,500
Home Guard 10,000
Police
17,000
a All security forces are expanding at a rapid pace, so the listed
strengths are estimates only. About one-third of the Army
volunteer force is on active duty at any given time. The National
Auxiliary Force is only now forming and is probably not even at
cadre strength for its proposed complement of 10,000.
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not trust the security forces because of their record of
massacring unarmed Tamils and will not lay down
their arms. They also refuse to surrender their goal of
autonomy, if not freedom, in the two provinces that
they believe constitute their traditional homeland.
Colombo's efforts to develop civilian support for the
counterinsurgency have been stillborn.
President Jayewardene
proposed to the Cabinet secretaries in March 1986
that the security forces assist in implementing
government development projects, such as road
construction, to aid Colombo's assistance to those
areas suffering from the war's ravages and to
associate the military with more positive efforts in
behalf of the local populace. The secretaries were split
in their assessment of the proposal, the first move by
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the government toward a "hearts and minds"
approach to the insurgency.
To weaken the Tamils' power in their home areas,
Colombo began trying last year to resettle whole
Sinhalese villages from the south into the north and
east. So far, these settlers have been introduced only
into previously uninhabited areas or areas with an
already strong Sinhalese presence. Resettlement will
have to be greatly expanded to achieve Colombo's
goal of establishing Sinhalese dominance throughout
the island, but this may prove unfeasible, given
insurgent opposition.
Outlook
Colombo's growing arsenal probably will allow it to
achieve limited success in its counterinsurgency, but
the security forces' weaknesses will prevent them from
achieving a lasting solution. Although Colombo's
forces are capable of capturing slices of rebel-held
territory and maintaining a somewhat greater
presence in the north and east, inability to do more
probably will frustrate hardliners in the military, the
political opposition, and the Cabinet and threaten the
government with a Sinhalese backlash. Over the long
term, a faltering counterinsurgency probably will
result in a significantly diminished central
government presence in Tamil areas and further
polarization of the ethnic communities.
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Sri Lanka: Tamil Insurgent
Ranks Grow
The number of Tamil insurgents has nearly doubled
during the last year, but rivalries between insurgent
groups and disputes over long-term strategy have
limited their effectiveness and territorial gains. The
insurgents have financed their growth through Indian
aid, international narcotics trafficking, and donations
from wealthy Tamils overseas, but some groups are
still low on funds. Despite attempts to secure
additional foreign backing, the insurgents have failed
to win sustained international support. Moreover, they
are vulnerable to another cutoff of Indian support as
occurred in 1985. Thus, the insurgents are likely to
try to become more self-sufficient, mainly through
robberies and drug trafficking. Unless the major
insurgent groups can develop political cohesion and
increase their support among Tamil civilians, their
growing numbers and new resources will probably not
alter the stalemate with government forces.
Rapid Growth
Since 1976, Tamil separatists in Sri Lanka have
grown from a scattered force of several hundred to an
organized insurgency of nearly 20,000. We estimate
during the last year alone insurgent strength grew by
almost 10,000. More than half of the insurgents most
likely have received training either in base camps in
the Indian state of Tamil Nadu or in Tamil areas of
Sri Lanka. The use of increasingly young recruits to
sustain antigovernment operations and the lack of new
training camps suggest many of the new recruits have
little training.
Two and a half years of fighting have isolated Tamil
areas in the north and east, denying Tamil youth
educational and employment opportunities in the
predominantly Sinhalese south and creating a large
pool of recruits for the insurgency. The insurgents
most likely have also recruited from the growing Sri
Lankan refugee population in Tamil Nadu?now
more than 130,000. the
People's Liberation Organization of Tamil Eelam
(PLOTE)?the largest insurgent group?has trained
Tamil women as well.
53
The insurgency has grown in strength despite low
levels of popular support among Tamil civilians. Press
reports indicate insurgents have executed Tamil
civilians and moderate Tamil politicians, plundered
most Tamil economic assets in the north and east, and
destroyed major rail and road links to economic
centers in the south. In response, some Tamil civilian
groups have organized strikes and protests in Jaffna?
the largest Tamil-dominated town in Sri Lanka. The
collapse of the government's administrative authority
in Jaffna?including the destruction of all but one
local police station?has left the Tamil civilian
population hostage to the major insurgent groups.
Nonetheless, the majority of Tamil civilians has
acquiesced in the political and military dominance of
the insurgents, suggesting they depend on them for
protection against more menacing government
security forces. the
government counterinsurgency campaign includes
frequent attacks against Tamil civilians in response to
insurgent attacks.
Funding
The insurgents prey upon Tamil civilians for the bulk
of their resources.
the insurgents depend on local agricultural
production for their food supply. Thefts of personal
property from Tamil civilians?particularly jewelry?
and repeated robberies of government-run banks in
the north and east have provided substantial revenue
for the major insurgent groups. In the north, the
insurgents have begun collecting taxes from the
civilian population.
The largest insurgent groups have also developed
international contacts to acquire arms and training
but have been unable to secure sustained foreign
support.
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Secret
Some insurgent leaders have received
training from the Popular Front for the Liberation of
Palestine (PFLP), and at least one major insurgent
group contracted in 1984 with the PFLP to train its
recruits.
most insurgent groups conduct their training in south
India and Sri Lanka.
Libya provides only small quantities of arms to Tamil
insurgents.
The Liberation Tigers of Tamil Eelam (LTTE)?the
most active insurgent group?is turning increasingly
toward narcotics trafficking to raise funds for its
operations, One
kilogram of heroin for sale in Sri Lanka will bring
$2,500, enough money, we estimate, to maintain a
moderate-size training camp in Tamil Nadu for a
week.
The failure of the insurgents to gain reliable patrons
other than India may be encouraging them to become
more self-sufficient. The LTTE's efforts to increase
funding from narcotics trafficking suggest it hopes to
develop enough financial independence to continue
operations even without Indian support. The major
insurgent groups remain heavily dependent on India
for weapons and ammunition but maintained limited
operations last fall without New Delhi's backing. We
believe Tamil expatriate contributions to the
insurgents may also have increased, adding to the
insurgents' fledgling independence.
The insurgents' growth and their efforts toward
greater self-sufficiency appear to be causing concern
in New Delhi. New
Delhi wants to improve its control over those groups
operating on Indian soil. It is considering creating a
unified command structure for all the insurgent
groups, resuming training of Tamil guerrillas in south
India, and assigning intelligence and military
advisers. New Delhi probably also wants to head off
attempts by insurgent leaders to revive and broaden
links to Iran, the PLFP, and Libya.
Secret
Problems for the Insurgents
The insurgents have paid a price for their rapid
growth. government
security forces made significant gains against the
insurgents in the Batticaloa and Amparai districts in
March in part because of growing indiscipline among
new insurgent recruits. Insurgent leaders in Eastern
Province have recruited indiscriminately, filling their
ranks with laborers and street toughs, resulting in a
proliferation of armed criminal gangs.
Insurgent disunity diminishes the impact of their
increased strength. There are five major insurgent
groups?each divided into regional commands?and
several minor groups not involved in the current
fighting. The US Consulate in Madras reports
growing divisions between four insurgent groups and a
weakening of their fragile alliance?the Eelam
National Liberation Front.
PLOTE opposes the hit-and-run tactics of two
other major groups because the attacks provoke
reprisals against Tamil civilians. The erosion of
discipline and morale among the major insurgent
groups is likely to increase internal rivalries and make
political and military cooperation even more elusive.
Earlier this month, more than 200 insurgents died in a
three-day battle between the LTTE and its rival?the
Tamil Eelam Liberation Organization.
Outlook
Government attacks on Tamil civilian targets are
likely to continue fueling the increase in insurgent
recruits in the near term. The increase in forces,
however, is unlikely to lead to significant territorial
gains for the insurgents or increased insurgent control
of contested areas. Without a consensus on political
objectives and military tactics, the insurgents, in our
view, will be unable to make effective use of the large
numbers of recruits. Instead, the prospect is for
increased anarchy in the Northern and Eastern
Provinces as growing numbers of undisciplined
insurgents begin operations against government
forces.
54
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The growth in the number of insurgents?including
increasingly young recruits?is likely to hurt
prospects for long-term reconciliation between
Sinhalese and Tamils. The increase could also
undermine the strength of moderate Tamils
attempting to bridge differences in the negotiations
between the government and the insurgents.
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III
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Saudi Arabia: Trouble With
French Frigates
The difficulties the Saudi Navy is experiencing with
the recently delivered French frigate Madina
constitute a major setback to Riyadh's ambitious
naval modernization program. The Saudis are
complaining about faulty French design and
construction. Moreover, shortages of skilled
manpower and budget cuts are causing additional
program delays. Saudi naval capabilities are likely to
fall below current levels during the next two years as
Riyadh shifts resources to the French ships in an
attempt to integrate them into the Navy. Saudi
displeasure with French quality control, training, and
general support in this purchase is likely to jeopardize
future French arms sales to the Saudis.
Saudi Naval Goals
The Saudi purchase of French ships and other
equipment under the so-called Sawari program is
intended to make Saudi Arabia a major naval power
in the region. The four French-built F-2000 frigates,
two oiler/replenishment ships, and 24 Dauphin
helicopters will enable the Saudis to operate farther
from base and will give them over-the-horizon
antiship capability as well as antisubmarine and shore
bombardment capabilities.
Saudi Problems With the French
the Saudis are unhappy with the French frigates.
Mechanical and structural problems with the Madina
caused the Navy to declare in January that the ship
was unseaworthy

nagging problems kept the Madina out of
Saudi naval exercises in late February. In early
March, the Madina was able to put to sea?probably
for short maneuvers?but several problems have not
been resolved:
? Leaks in its hull below the waterline require
constant pumping,
The Saudis blame the leaks on a faulty French
design using rivets, while the French claim the
Saudis were unwilling to pay for more expensive
welded construction.
57
Sawari Deliveries: Slight Delays
Since its signing in 1980 the Sawari program
generally has proceeded on schedule, and delivery
dates have slipped by only about six months from the
original estimates.
Ship Type Current Arrival
Schedule
BORAIDA Oiler August 1984
MADINA Frigate July 1985
YANBU Oiler February 1986
HOFUF Frigate March 1986
ABHA Frigate September 1986
TAIF Frigate February 1987
? Defective protective paint has caused excessive
corrosion of the hull.
The French blame this on the Saudis, who failed to
choose the more expensive "warm water" paint.
the
Madina has problems with its reduction gear
(transmission). Normally intended to last for the life
of the ship with little maintenance, serious damage
to the reduction gear would require a major
overhaul.
Another problem revolves around the language
barrier between Saudi naval personnel and their
French instructors.
most training has been conducted in
English despite the lack of fluency in that language
among both instructors and students. This has
compounded the difficulty of understanding technical
subjects and has caused considerable frustration in
the Saudi Navy, in the 25X1
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French F-2000 Frigates:
Versatility and Firepower
The four guided-missile frigates purchased by Saudi
Arabia have the potential to increase significantly the
firepower and operational versatility of the Saudi
Navy. The heavily armed frigates are each equipped
with eight Otomat Compact antiship missiles, 26
Crotale surface-to-air missiles, one 100-mm gun,
four 40-mm twin cannons, and four antisubmarine
torpedos. Each frigate has one Dauphin II helicopter
that can provide over-the-horizon targeting
information to exploit the 180-km range of the
Otomat missile. The Dauphin II is also armed with a
shorter range air-to-surface missile, the AS-15TT.
training program with any country that does not
s eak English.
naval personnel rate overall French training
as mediocre in comparison with US training.
Saudi Problems Hinder Program
Problems common to other Saudi defense projects are
hindering the integration of the French vessels into
the Saudi Navy. The biggest challenge Riyadh faces
is a lack of personnel to man the new vessels. The
Navy relies on expatriate and foreign national
personnel?primarily Pakistanis?to man its existing
fleet and provide support and maintenance. We
believe the need for 1,000 men to staff the Sawari
vessels will cause the Navy to take qualified sailors
from other ships. This will temporarily reduce the
capabilities of the entire fleet. If Riyadh requires all-
Saudi crews for the new ships, as one naval officer
reported, then manpower shortages will be especially
acute.
Saudi inexperience with high-technology naval
equipment also is likely to impede full use of the
Sawari ships. naval
officers expect new equipment to operate virtually
automatically and with little or no maintenance?an
unrealistic expectation. Moreover, according to the
Secret
Basing the Saudi Navy
The delivery of four French frigates is causing the
Saudi Navy to redeploy US-supplied vessels to the
Persian Gulf. When complete, the Navy's Western
flotilla at Jiddah will consist entirely of ships
acquired under the Sawari contract. After the
transfer from Jiddah to Jubayl, all nine US-built
fast-attack missile boats as well as four corvettes will
be stationed in the Persian Gulf. Separating US- and
French-built ships is expected to limit supply and
maintenance problems. Although basing the new
frigates at Jiddah limits their ability to protect Saudi
interests in the Persian Gulf and Strait of Hormuz, it
reduces the risk of the frigates being attacked by
Iran. Indeed, moving the frigates to the Persian Gulf
could be viewed in Tehran as a threat.
The Saudis apparently believe that little
new training will be required to switch personnel from
US to French systems.
Budget cutbacks by the Ministry of Defense and
Aviation have had and are likely to continue to have a
substantial impact on the Sawari program.
Riyadh last spring was $1 billion
behind in payments. Moreover, budget cuts have
affected construction of support facilities in Saudi
Arabia. less than
half of the $250 million needed to build port and
helicopter facilities at Jiddah and Jubayl is available.
Consequently, Riyadh has canceled plans to construct
facilities at Jubayl and postponed further construction
at Jiddah. Without the Jubayl port facility, the Navy
will not be able to deploy the frigates to the Persian
Gulf for extended periods.
Implications
We suspect that Riyadh's experiences with the Sawari
program significantly reduces the likelihood of future
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Secret
French arms sales to Saudi Arabia. Although not all
problems can be traced to poor French design or
contract performance, naval officers have remarked
they would like to limit future French deals unless
product quality and after-sales support improve.
Given Saudi Arabia's lower oil earnings, we believe
that Riyadh will be wary of giving the French a
chance to atone for the mistakes in the Sawari
program. Moreover, Saudi Arabia's difficulties
integrating the French vessels into the Navy and the
decision to establish the ships' home base at Jiddah
suggest that the Saudis will continue to rely on the
United States to play an important role in the defense
of the Persian Gulf until at least the 1990s.
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Saudi Arabia's Fourth Estate:
Potential for Conflict With the
Government
Saudi Arabia's privately owned press is not subject to
routine prepublication censorship, but unwritten
guidelines are causing friction between it and the
government. Saudi editors and publishers have been
officially reprimanded, interrogated, and subjected to
travel restrictions for exceeding government-defined
bounds, and King Fahd appears to be taking a leading
role in the crackdown. The government has
maintained effective control over the press so far, but
heightened social, economic, and political grievances
among Saudis over the next several years increase
prospects for a potentially serious confrontation that
would put the press in the forefront of political
activism in the kingdom.
Since the first Saudi newspaper was founded in 1924,
the press has assumed an increasingly important role
in shaping popular attitudes in Saudi Arabia. The
growing literacy of the native population?up from
about 5 percent in 1955 to nearly 50 percent in
1986?has been most responsible for the increased
prominence of the press. Eight Arabic- and two
English-language daily newspapers are the most
influential. Their combined circulation has increased
nearly 10 times in the past decade?from
approximately 70,000 in 1976 to 600,000 to 700,000
today. The circulation of weekly newspapers
(200,000), several major foreign daily newspapers
(50,000), and numerous domestic and foreign
magazines also has risen sharply. The growing
number of Saudis educated in the West has
contributed to a significant rise in readership of
foreign and domestic English-language newspapers.
Government Control
The increasing influence of the press in the kingdom
has prompted the Al Seud regime to monitor growth
closely through government agencies, regulations, and
direct oversight. King Sa`ud in 1953 established the
General Directorate of Broadcasting, Printing, and
Publishing to organize, coordinate, and supervise all
media activities in Saudi Arabia. In 1963 King Faysal
61
replaced the General Directorate with a Cabinet-level
department, the Ministry of Information. Faysal
strengthened government supervision of the press the
following year when he decreed that newspapers
would remain privately owned, but each publisher
must form a licensed organization, a "press
establishment," that would be subject to official
guidelines and review.
Publishing concessions are granted only to groups of
Saudi citizens (no less than 15) who are approved by
the Ministry of Information. Each press establishment
is headed by a director general who is nominated by
its members but is subject to Ministry approval. The
same process is followed for editor in chief
appointments. Each establishment also must set up a
committee on editorial supervision to monitor closely
the organization's publication process.
By law the King maintains ultimate control over the
press, and he has the power to revoke the concession
of any press establishment, to fire and hire newspaper
editors, and to ban the circulation of any publication
in the kingdom. The King usually works through the
Minister of Information, consistently a commoner,
apparently to reduce Al Sa`ud identification with
press control.
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Saudi Arabia is conducted almost exclusively through
the Saudi Press Agency (SPA), the only indigenous
news service. The SPA, under the jurisdiction of the
Ministry of Information, is a quasi-official,
government-owned organization designed to channel 25X1
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submitted to Ministry of Information censors before
they are authorized for sale in the kingdom.
Government censors can either ban distribution
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The Saudi Press
Circulation
Date
Established
Where
Published
Remarks
Umm al-Qura
40,000-
1930s
Mecca
Official government gazette (weekly)
50,000
(1982)
Al-Madina
55,000
1937
Jiddah (since
Kingdom's first Arab language daily; conservative, religious
al-Munawwara
(1985)
1964)
orientation; often harsh critic of US Middle East policies
Al-Bilad
30,000
1946
Jiddah
Arabic daily; formerly Sawt al-Hijaz, established in 1924;
(1985)
middle-of-the-road editorials; poor in resources and
coverage; emphasizes domestic issues
Al-Nadwa
35,000
About 1958
Mecca
Arabic daily; conservative, editorials often have extremist
(1985)
religious focus; close ties to Muslim World League;
staunchly pro-Palestinian
Al-Jazira
150,000
1974
Riyadh
Kingdom's largest Arabic daily; socially and intellectually
(1985)
liberal by Saudi standards; Arab nationalist orientation
Al-Riyad
140,000
1964
Riyadh
Arabic daily; liberal by Saudi standards, but somewhat less
(1985)
so than Al-Jazira; pan-Arab orientation; skilled writer Turki
Abdallah al-Sudayri editor in chief
Ukaz
60,000 to
1960
Jiddah
Arabic daily; somewhat less liberal than Al-Jazira and Al-
75,000
Riyad on social issues; middle-of-the-road political outlook
(1982)
Al-Yawm
25,000
1974
Damman
Arabic daily; most nationalistic and Arab nationalist Saudi
(1985)
(Eastern
paper; strong anti-US strain in editorials, reflecting large
Province)
Shia population and proximity to Iran
Arab News
35,000
1974
Jiddah
Kingdom's first English-language daily newspaper;
(1982)
international coverage; editorials consistently anti-US;
published by Saudi Research and Marketing Company
Saudi Gazette
22,500
1976
Jiddah
English-language daily; domestic and financial focus
(1985)
Al-Majallah
Over
1980
London
Arab-language international weekly; published by the Saudi
100,000
Research and Marketing Company (with some government
(1984)
funding); circulated in more than 40 countries
Al-Sharq al-Awsat
Over
1978
London
Arabic daily; largest Arab-language newspaper in the
100,000
Middle East; since 1980 simultaneously published in Jiddah,
(1985)
Riyadh, Paris, and Casablanca; middle-of-the-road on Arab
political issues; published by the Saudi Research and
Marketing Company
Al-Yamamah
40,000
1952
Jiddah
Arab-language political, social, economic, and literary
(1985)
weekly
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completely or authorize distribution after deletions
are made. Items that are most frequently subject to
deletion, which must be made by distributors, include:
? Articles critical of Saudi policies, the royal family,
or Islam.
? Liquor advertisements.
? Nude or revealing pictures.
? Sexually explicit or connotative articles.
? Advertisements for commercial and real estate
opportunities in Israel.
Newspaper Staffs
Educated Saudis traditionally have shunned
journalism because it has not been considered a
prestigious profession. It is generally lower paying
than other private- and even public-sector jobs, and
official guidelines restricting press freedoms create
the potential for conflict with the government. Indeed,
most newspapers employ expatriates?mainly non-
Saudi Arabs, Pakistanis, Indians, and Westerners?
and several editors of major Saudi newspapers are
foreigners. many
Saudis who hold senior positions on newspaper staffs
spend little time or energy on their jobs, devoting
more attention to their private business pursuits.I
Secret
Official Guidelines
Unwritten official guidelines on what is permissible to
publish in Saudi Arabia's newspapers and magazines
have existed for over 50 years, but we believe the
government has adopted more rigid strictures since
King Fahd assumed the throne in 1982. Shortly after
becoming King, Fahd appointed Ali Hasan
a longtime confidant, as Minister of Information.
According to US Embassy officials, Fahd is more
aware than his predecessors of the power of the press,
and he has sought to exert closer control over its
activities.
Over the past several years, however, there has been a
steady increase in the number of young Saudis
working for the kingdom's newspapers.
reduced job opportunities resulting
from lower oil revenues have prompted many young
Saudis, particularly those with liberal arts degrees, to
accept employment as journalists. Many of these
young Saudis see work with the press as a stepping-
stone to a more lucrative profession, but some are
conscientious, hard working, and plan to make a
career out of journalism.
The percentage of Saudis working in the kingdom's
press is likely to increase steadily over the next several
years as employment opportunities in the kingdom
remain depressed and the number of university
graduates continues to rise. Press establishments will
be particularly eager to hire qualified Saudis for
management positions. Even so, Saudi newspapers
will continue to rely on a significant number of
foreigners over the next decade, particularly for
menial jobs that Saudis will continue to avoid.
63
Government officials have no regular screening
process for news stories and editorials, but the
Ministry of Information frequently issues specific
directives to the press about disallowed articles. News
stories on politically sensitive issues sometimes are
altered or censored completely by the Ministry of
Information,
the Saudi Government
directed newspaper editors not to print commentary
or analysis on the fighting in South Yemen last
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Ali Hasan al-Sha`ir
Minister of Information
Ali Hasan al-Sha'ir brought an image of professionalism and dynamism to the
Ministry of Information when he joined the Saudi Cabinet
in April 1983. A retired lieutenant general in the Saudi Army, Sha'ir is a skilled
diplomat who is personally close to Fahd. He also appears to be an effective
executor of Fahd 's rigid information policy. According to US Embassy reporting,
he shares Fahd's pro-US political orientation and is relatively progressive on
social issues. Sha'ir was Saudi Ambassador to Lebanon from 1976 to 1983, and
he maintains residual contacts with Lebanese and Syrian leaders. He is a key
adviser to the King on Levantine issues. Sha`ir, a native of Al Madinah, is about
59 years old.
January, probably at the point when the more
strongly pro-Soviet faction gained the upper hand in
the conflict.
The Minister of Information provides regular
feedback to editors and publishers on the acceptability
of theirtapers' editorials.
the Minister comments on the focus and tone
of specific editorials, and he frequently makes
recommendations about how subjects should be
treated in the future. The Minister also relays the
views of the King, a
voracious reader of the domestic and international
press.
The Saudi Government probably allows a greater
degree of editorial freedom in the two English-
language dailies?the Arab News and the Saudi
Gazette?because their readership is primarily from
the Western expatriate community. Both papers are
frequently acerbic in their editorial criticism of US
policies in the Middle East. US Embassy officials
believe the government tolerates a strong anti-US line
because the papers purvey to Westerners in the
kingdom the depth of Arab displeasure with various
US policies. The US Embassy does not believe that
harsh anti-US editorials in these papers serve as
catalysts for anti-American actions.
Secret
Increased Friction
Official guidelines frequently have caused friction
between the government and the press. The King has
punished editors, publishers, and even senior
government officials for overstepping the nebulous
bounds of press freedom. In 1983 the press provided
the setting for one of the rare public airings of
dissension within the Saudi Government when King
Fahd fired Minister of Health Qosaibi for publishing
a poem in a Saudi newspaper that was implicitly
critical of the King and the traditional Saudi political
system. According to US Embassy officials, the King
and senior princes were upset more by the publication
of the poem than by its content; it set a dangerous
precedent for using the press as a vehicle for political
dissent.
The US Embassy and other reliable sources have
reported several recent confrontations between the
Saudi Government and publishers and editors:
? King Fahd, angered by an article in the weekly
newspaper Al-Majallah that he believed was a
primer on how to conduct a coup, imposed strict
travel restrictions on the magazine's publisher and
his family.
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? Ministry of Interior officials arrested and detained
the national editor of the Arab News last November
because he published an article about government
plans to reduce agricultural subsidies.
? The Minister of Information summoned the
publisher of Arabia: The Islamic World Review last
September and demanded that articles critical of
Morocco, Kuwait, Syria, and Pakistan not be
printed in his magazine.
The Arab News and the Saudi Gazette, under
aggressive leadership, have been pushing against
government limits on editorial freedom, and other
newspapers almost certainly are carefully watching
the official reaction. The US Embassy believes that
government retaliation against editors and publishers
is intensifying tensions between the government and
the press. Harassment of senior newspaper officials
hinders the operations of the newspapers and
intimidates the staff. Moreover, Westernized and US-
educated Saudis probably are becoming increasingly
critical of government interference in the
dissemination of news and information throughout the
kingdom.
Prospects
Over the next several years the growth and increased
professionalism of the Saudi press combined with a
likely increase in popular criticism of the Al Seud
regime over other issues heighten prospects for a
serious confrontation between the government and the
press. The monarchy is unlikely to allow greater press
independence because the King and senior princes
almost certainly believe it would lead to even wider
grumbling against the regime and perhaps an increase
in political activism. Although Fahd has been
instrumental in designing government policy toward
the press, his likely successors?Crown Prince
Abdallah or Defense Minister Sultan?probably also
have rigid views on press freedom. We do not expect
government policy to change significantly as a result
of Fahd's death.
65
In our view, editors will continue to overstep
unwritten guidelines?intentionally and
accidentally?and the government will be forced to
take punitive measures to inhibit recurrences.
Repeated offenses probably would lead the
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revoke the licenses of press establishments, and
possibly institute prepublication censorship. The
government will avoid imprisoning respected
newspaper publishers, editors, or journalists to prevent
a backlash from those Saudis already critical of
government authoritarianism.
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Press issues that have the greatest potential to lead to
politically significant confrontations include official
corruption, economic difficulties, Islamic
fundamentalism, US-Saudi relations, political reform, 25X1
and social issues, like women's rights.
Implications for US Interests
Current Saudi Government control over the
kingdom's press promotes US interests by:
? Restricting sensational anti-US commentary in the
Arabic-language dailies.
? Preventing public criticism of US-Saudi ties.
? Stifling public criticism of the Al Sa`ud regime,
thereby reducing chances for near-term instability
that would threaten extensive US political, security,
and commercial interests in the kingdom.
? Ensuring support for moderate Arab positions that
are endorsed by the Saudi Government, such as a
negotiated settlement to the Arab-Israeli conflict.
? Promoting strong criticism of the Soviet occupation
of Afghanistan.
But Saudi Government control over the press in the
kingdom also has its drawbacks:
? It prevents strong criticism of radical Arab states
and their objectives.
? It does not allow press support for US policy
objectives?for example, PLO endorsement of UN
Resolutions 242 and 338?that are not publicly
supported by the Saudi Government.
? It prevents the press from encouraging the Saudi
Government to adopt more forward-leaning
positions on issues important to US Middle East
interests.
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? It makes the press an inadequate vent for popular
frustrations and grievances, which increases chances
for political unrest that would threaten US interests.
Nonetheless, increased press freedom in Saudi Arabia
probably would result in more vehement criticism of
US Middle East policies, which would heighten anti-
US sentiment among Saudis. US economic and
military support to Israel, already a favorite target of
strong media reproof, would come under sharper fire.
Sensational reporting and editorials critical of the
United States would increase chances of
unprecedented anti-US activities, such as public
demonstrations and even terrorism.
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Tunisia: Bourguiba Struggles To
Strengthen His Grip
President Bourguiba recently reorganized his Cabinet
and transferred the Interior Ministry from his
handpicked successor, Prime Minister Mzali, to Gen.
Ben Ali, a military officer in charge of the police and
intelligence apparatus. This change could indicate
that the President believes that he needs a stronger
man as Prime Minister and heir apparent. The move
follows a series of repressive measures by Bourguiba
over the last several months to cope with increasing
political unrest and to counter a widening public view
that he is infirm and not in complete control.
Although his opponents may be intimidated in the
short term, Bourguiba's crackdown could in time lead
to greater cooperation among his foes and increasing
violence. Because Bourguiba is a staunch supporter of
the United States, we believe that at least some of the
President's opponents would be quick to identify the
United States with the repressive regime, and such
criticism could strike a reponsive chord among the
increasing number of disadvantaged Tunisians.
Crackdown on Dissent
The 84-year-old President is resorting to increasingly
heavyhanded tactics to shore up his authority. He
recently intensified an anticorruption campaign to
cow critics within the Tunisian elite. He ordered the
arrest on corruption charges of two prominent
businessmen linked politically and economically to his
estranged wife. The singling out of those persons
almost certainly was perceived locally as related to
palace politics, but the vindictiveness of the campaign
and the six-year prison sentences against two of their
own have badly shaken the business elite, traditionally
among the strongest supporters of the ruling party.
Many wonder where the corruption campaign will
stop.
At the same time, the government has cracked down
on other politically influential elements. The head of
the country's main trade union federation is in jail,
and the union leadership has been dismantled.
Bourguiba also ordered the arrest of the principal
opposition leader?the secretary general of the
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Socialist Democratic Movement?who had criticized
the President's neutrality toward the US airstrike on
Libya. Although he has been released from jail for
health reasons, his sentencing could effectively
exclude opposition participation in the legislative
election scheduled for November. Since these
elections are held only every five years and the
opposition was denied seats in the 1981 contest,
frustration among the politically active segment of the
population probably is high. Indeed, Bourguiba
appears certain to add to this by pushing ahead with a
law barring parties founded on religion?a measure
that will effectively exclude Islamic fundamentalists.
The Bourguiba regime also has instituted a get-tough
policy toward students. The university campuses have
been subject to police rule since mid-February, and
Islamic fundamentalists both on and off campus have
faced arrest. In late April the shooting of an Islamic
fundamentalist student leader by the police sparked
violent demonstrations that led to the arrest of more
than 1,000 students. Many of these have been
conscripted into the armed forces. Some of the Tunis
university campuses remain closed, and most others
are paralyzed by student strikes. Somewhat
disturbing for the regime, the repressive measures
have prompted the heretofore antagonistic Islamic
militants and extreme leftists to work together.
Is Mzali on the Way Out?
In addition to the crackdown on dissent, another sign
that Bourguiba is making security the number-one
priority of his regime is his decision to transfer the
Interior Ministry from Prime Minister Mzali to Gen.
Ben Ali. According to the US Embassy in Tunis, most
Tunisians believe Ben Ali favors repression of
government opponents, while Mzali is more of a
conciliator.
This change coincides with persistent rumors in Tunis
over the past few months that Bourguiba has decided
to replace Mzali, who has held his post for five years.
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The summary firing of Mzali's righthand man, Mezri
Chekir, supports this belief?so, too, does the
President's recent choice of Public Works Minister
Sayah instead of Mzali to prepare the congress of the
ruling Destourian Socialist Party (PSD) in June. Two
other Mzali proteges have been shifted out of their
posts?Mohamed Fredj Chedli from the Ministry of
National Education and Amur Ghedira from the
position of Secretary of State at the Ministry of the
Interior to mayor of Monastir.
Several personalities could become the new heir
apparent. These include Mansur Skhiri, the Minister
attached to the Presidency, who has virtually
unlimited access to the President and on whom
Bourguiba has relied as a way of balancing Mzali's
opinions; Mohamed Sayah, who has built a strong
political base primarily of loyal PSD members who
owe their positions to him; and Ben Ali, whose power
derives from his control over the security forces and
ties to the military. The President's son, Habib Junior
and Foreign Minister Caid Essebsi may also be
contenders, even though their influence has waned
recently.
Prospects and Implications for the United States
There is a possibility that Bourguiba's repressive
measures could push events in Tunisia in a more
negative direction for Washington. If continued for
long, such steps could foster links between disparate
opponents with little sense of common political
purpose and could ultimately lead to violence. Islamic
fundamentalists and leftist opponents?including
students, workers, and lower economic classes?would
highlight the President's close relationship with
Washington and accent the point that US security
assistance is being used for repression. Such anti-US
sentiment could be exploited in the economically
depressed south by Libyan-trained dissidents who are
well placed to play upon social unrest there. Although
we view this latter development as unlikely, it could
make an orderly, relatively pro-Western succession
more difficult in Tunisia. If events in Tunisia took a
negative turn, we would expect the basically pro-
Western military to step in to maintain political
stability and diplomatic continuity.
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For the present, the way appears clear for a relatively
unobstructed and generally pro-Western transition in
Tunisia. All of Bourguiba's potential successors have
had training in the United States or France, are
basically pro-Western, and almost certainly would
continue to ask for Western economic and military
assistance. Nevertheless, each probably would be less
sympathetic to Washington than Bourguiba, who is
staunchly pro?United States.
most of the Tunisian elite believe that the
United States has paid insufficient attention to the
country's security needs. The Israeli airstrike on the
PLO headquarters in Tunis last October added to
their frustration with Washington. We believe all of
the potential successors would strive for a more
nonaligned position, cooperate more closely with
African and Arab neighbors, and put distance
between themselves and the United States.
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