WEEKLY SUMMARY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000300020002-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 28
• Document Creation Date: December 27, 2016
• Document Release Date: February 23, 2011
• Sequence Number: 2
• Publication Date: January 10, 1975
• Content Type: SUMMARY

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CIA-RDP86T00608R00030002
Declassified in Part -
Sanitized Copy Approved for
Release 2013/11/13 :
CIA-RDP86T00608R00030002
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Weekly Summary
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No. 0002/75
JanucTy 10, 1975
Cop', N9 1321
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The WEEKLY SUMMARY, i!,sued every Friday morning by
the Office of Current. Intelligence, reports and analyi.es signif?
icant developrnenk, of the week through noon on Thursday. It
frequently r'rclirde,. material coordinated with or prepared by
the Office of Economic Resedrch, the Office of Strategic
Research, and the Directorate of Science and "lechnology.
Topics requiring more comprehensive treatment and thereforn
published separately as Special Reports are listed in the
contents.
CONTENTS (January 10, 1975)
EUROPE
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INTERNATIONAL
MIDDLE EAST
AFRICA
EAST ASIA
PACIFIC
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WESTERN
HEMISPHERE
1 The Soviet Union
3 Venezuela Protests US Trade Law
4 Mexico: The OPEC Question
5 Egypt: Moving Against Protesters
6 Portugal: USSR; Socialists; Economy
8 EC Prepares for Trade Talks
11 US-USSR: Defense Costs Compared
14 Bulgaria: Friendship Offensive
15 Break in Gold Price
16 Arab States: Meeting in Cairo
17 Syria-Lebanon: Promising Support
18 Israel: More Guided-Missile Boats
19 Ethiopia: Concessions on Eritrea
19 Angola: Getting Together
21 Cambodia: Fighting Around Phnom Pen
22 Vietnam: Saigon Suffers Setback
24 Argentina: Elevating Lopez Rega
24 Latin America: Seeking New Alliances
25 Bolivia: Looking Westward
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The Soviet Union
BREZHNEV'S POLITICAL HEALTH
Soviet authorities are making a concerted
effort to dispel rumors circulating in Moscow
about political differences within the Soviet lead-
ership. On January 8, Tass strongly denied an
article in Le Monde speculating along these lines.
Tass also reported that Brezhnev, who has been
periodically hospitalized over the past two \,vecks,
attended the lying-in-state of his mother. The
report did not specifically note that he attended
the funeral, although his car was seen at ;.he
cemetery.
The rumors followed a period in which sonic
of Brezhnev's pi-oqrams and initiatives struck
snags, arid there was much speculation about the
nature of the General Secretary's illness. There is
1:0 sign, however, that the essential elements of
his policies or autho, ity are under attack. Among
the policy snags was the postponement of Brezh-
nev's highly touted visit to Egypt. His health
problems clearly played a part in the decision to
put off the trip, but it is also likely that Moscow
had been unable to gain Cairo's agreement on
political questions, particularly those related to
the Soviet role in Middle East peace negotiations.
In additi--.., his problems with the Egyp-
tians, difficulties surfaced last month regarding
Brezhnev's twin programs of consumer welfare
and detente?particularly, economic relations
with the US. A plenary meeting of the party
Central Committee opened and closed on Decem-
ber 16, leaving an unusual one-day gap before the
USSR Supreme Soviet session convened on
December 18. A two-day plenum may have been
planned and then, for unknown reasons, cut
short. Brezhnev spoke on domestic and foreign
policy at the plenum.
The Central Committee and the Supreme
Soviet approved the economic plan for 1975,
specifying that producer goods indus...ries would
grow at a higher rate than would consumer goods
industries. This scheme reverses the rates of
growth set forth in the 1971-75 plan. Those rates
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were linked, at least in propaganda, with Brezh-
nev's promise to improve living standards, which
was called the "main task" of this and future
five-ynr plans.
Two days after the plenum, Moscow pub-
lished Foreign Minister Gromyko's letter of Octo-
ber 26 to Secretary Kissinger and a Tass state-
ment, both of which denied that the USSR had
agreed to foreign demands on emigration in
connection with US foreign trade legislation.
Soviet media have also turned from euphoric
treatment of the recent US-USSR summit to criti-
cism of US trade restrictions and to hints of
negative consequences for relations with the US.
Some of these developments were beyond
Brezhnev's control, but they do constitute set-
backs to policies closely associal-cld with him. Fur-
thermore, the policies affected are among those
that have always been viewed skeptically by at
least some members of Soviet officialdom.
Thus far, Brezhnev's authority does not
appear to be impaired nor does there Leem to
have been any shift in Soviet policy. Despite the
efforts to put down the rumors of trouble within
the leadership, however, there are many un-
knowns in the present equation. If Brezhnev is
unable to return to work soon and to demon-
strate that he retains the initiative in policy
matters, his political position would almost cer-
tainly be weakened.
SOVIETS HIT US, PRAISE DETENTE
The Soviet media have taken a harsher view
of the US as the after-glow of Vladivostok has
given way to more frequent and explicit criticism
on a wide range of issues. There is no evidence,
however, that the Soviet commitment to detente
has changed. Moscow is expressing pique and
frustration over specific foreign policy disappoint-
ments, particularly recent US trade legislation. In
addition, the Soviets have been unwilling to forgo
the propaganda opportunities offered by Western
economic and political difficulties. With Soviet
doubts about the Ford administration allayed by
the November summit and with the trade reform
bill now on the books, Moscow may belic, e it has
a freer hand to criticize the US. The leiidership
may have an interest in taking a tougher line
toward the US to show any present or potential
domestic critics that it has not been unduly solic-
itous of the US.
The Soviets have yet to take an o ficia I pub-
lic stand on the US trade reform act that links
most-favored-nation status with Soviet emigration
and on Export-Import Bank legislat:on limiting
credits to the USSR, but press reaction has been
negative.
AttributirT the congres-
sional action to a minority of cold?war advocates
and Zionists, Soviet media have repeated reserva-
tions expressed by President Ford and Secretary
Kissinger about both bills.
Moscow has refrained from mentioning
t.pecific plans for retaliation, but has endeavored
to portray the US as the ultimate loser, hinting
that the Soviets can always take their business
elsewhere. Some of this is bluff, and Deputy
Foreign Trade Minister Alkhimov
is optimistic about
the future of US-Soviet economic ties.
Nevertheless, Soviet diappointment with the
provisions of the trade bill has carried over to its
treatment of the US on other issues. Soviet media
have fanned speculation that the US is preparing
for military action in the Middle East; they have
reacted with obvious relish to allegations of CIA
misdeeds; and they have commented at length on
the troubles of Western economies.
The Soviets have endeavored to keep these
harsh notes from jeopardizing more fundamental
interests. They have consistently hewed to their
standard line on the necessity for US-Soviet
detente and the importance of the arms limitation
goals agreed on at Vladivostok.1
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Venezuela Protests US Trade Law
The US trade reform bill signed into legisla-
tion last week has provoked sharp opposition
from business and political leaders in Venezuela
and has brought the Perez administration into its
first major confrontation with the US since it
came to power nine months ago.
Both Caracas and Quito have called for a
special session of the Organization of American
States to discuss what Perez charges is a "clear act
of economic aggression and political pressure." In
a letter on January 4 to Ecuadorean President
Rodriguez, Perez pointedly expressed support for
the recent statement of Ecuador's foreign minis-
ter concerning his country's intention not to at-
tend the meeting of foreign ministers in Buenos
Aires in late March because of the trade act.
Later, in a news conference, Foreign Minister
Schacht told reporters that Venezuela is also
inclined not to attend the Buenos Aires meeting.
The call for OAS action by Venezuela and
Ecuador caps several weeks of angry reaction?
particularly in Venezuela?to those provisions of
the trade act that would deny US tariff prefer-
ences to members of cartels that, in effect, with-
hold supplies of vital raw materials from the
world market. Perez believes that such provisions
are aimed specifically dt his country, not only
because of its membership in OPEC but also
because of its well-publicized efforts to work out
a new economic relationship between producers
and consumers that would improve the terms for
exporters of raw materials or commodities.
In his New Year's Day address to the nation,
Perez criticized the US for actions that "create a
climate of confrontation." Later, he raised the
intensity of the verbal attacks a few notches by
calling into question the sincerity of recent US
efforts to open a new dialogue with Latin Amer-
ica, charging the US with discriminating against
Venezuela. Perez apparently also intends to carry
the issue of the trade act to other forums besides
the OAS. OPEC finance, petroleum, and foreign
ministers will meet in Algiers on January 24 to
discuss world economic strategy, and Venezuelan
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delegates intend to raise the trade act. The Vene-
zuelans may try to argue that the recently en-
acted legislation violates the UN's Charter of Eco-
nomic Rights and Duties of States.
Venezuela's primary tactic is to seek a
united position of Latin American countries in
the OAS opposing the law as contrary to the
interests of all Latin American countries?not just
Venezuela and Ecuador, the two countries most
directly affected. At the same time, Perez is
trying to further his position as leader in the
hemisphere, a role that he disclaims for himself
but that?privately?many Venezuelans support.
Perez is an astute observer of public opinion and
has been successful in measuring the feelings of
Venezuelans on international and domestic issues.
His charge that the US is insensitive to his coun-
try's call for a new economic relationship
between producers and consumers of raw ma-
terials reflects the view of most of his coun-
trymen. He has received support across the politi-
cal spectrum in Venezuela for his efforts to bring
the country forward as a major power as well as
for recent steps toward eliminating foreign
control over the country's raw materials. These
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latest moves will further enhance his popular
support.
In the meantime, the strong reaction to the
trade law is expected to gather further mo-
mentum as the Venezuelan congress, political
parties, and other institutions add their voices to
those of President Perez, Foreign Minister
Schacht, and other government officials, who ap-
parently are waiting for the US to make the next
move.
Mexico: The OPEC Question
The question of whether Mexico should seek
membership in the Organization of Petroleum
Exporting Countries was resolved last week by
the firing of Horacio Flores de la Pena, the cabi-
net minister who handled government policy on
oil and other natural resources. Flores was re-
moved from his job as secretary of national
properties, apparently because he had, among
other things, pushed too hard publicly for full
Mexican membership in OPEC at a time when
President Echeverria evidently thought it wiser to
adopt a go-slow approach.
Flores' replacement. Francisco Javier Alejo,
set the record straight in his first public statement
in his new job, saying that Mexico should consult
with OPEC but not become a member. Indeed,
according to the US embassy, the decision to
shun OPEC membership does not mean that
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Mexico will not collaborate with OPEC countries
where possible on matters of common interest
nor that Mexico will abandon its policy of selling
at OPEC prices. Rather, Mexico will continue to
set top prices for its oil, both to increase much-
needed revenues and to justify remaining outside
the organization.
Echeverria doubtless chose a cautious course
toward OPEC in part because of the anti-cartel
provision in the recently enacted US Trade Re-
form Act. Under this bill, OPEC membership
means exclusion from preferential trade 'treat-
ment. Although the trade bill has been harshly
criticized by the Mexican press, the government
nevertheless believes it offers some advantages.
Mexico, for example, wants to be designated a
beneficiary developing country eligible for the
generalized system of tariff preferences as pro-
vided in the bill. Even more important, it is look-
ing forward to the opportunity offered by the bill
to negotiate US tariff, and non-tariff barriers,
which the Mexicans have long regarded as re-
straints on trade with the US. Mexico insists that
it must improve its trade position in order to
maintain a high rate of economic development.
Officials are optimistic that the US trade law will
offer new opportunities to increase Mexico's
the US.
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Egypt: Moving Against Protesters
Government authorities have responded to
the labor demonstrations in Cairo last week with
a combination of punitive moves against SUS-
pectecl agitators and measures to help ease legiti-
mate economic grievances. The crackdown will
remove from the scene many protesters prone to
violence, but the measures intended to satisfy
disgruntled consumers fall short of what is re-
quired.
On New Year's Day, laborers from Hulwan,
an industrial city south of the capital, tied up
downtown Cairo with a violent demonstration
against shortages of consumer goods, high prices,
and low wages. Students joined the protesters,
swelling their ranks to over 2,000. For the next
several days students at Cairo's two universities
held campus rallies in sympathy with the laborers.
The government apparently first believed the
demonstration was spontaneous, but subsequent
indications have pointed to leftist influence. Ele-
ments from Egypt's small but recently resurgent
Communist Party, as well as radical leftist youth,
have for some time been attempting to stir up
trouble, particularly among students. Government
authorities believe these activists had begun to
operate with relative impunity in the expectation
that the government would not interfere while
the visit of Soviet party chief Brezhnev was still
pending.
/the post-
ponement of that visit and the demonstrations
last week led Cairo to crack down. At least 200
and possibly as many as 400 Communist Party
members and other leftist activists have been ar-
rested. The government also has issued stern
warnings against future disturbances.
Meanwhile, the government is attempting to
respond to popular grievances. The cabinet this
week announced a decision, actually reached be-
fore the demonstration, to allocate additional
funds for the immediate import of consumer
goods. The government has also promised to re-
view the draft of an unpopular labor reform bill.
Y
Police fire tear gas on demonstrators
These measures will not satisfy basic con-
sumer demands as the country's modest re-
sources, limited port capacities, and inadequate
internal distribution system preclude any early
increase in consumer goods. Popular discontent is
thus likely to continue for some time. This could
stimulate further disturbances over political and
economic issues, despite government moves to
corral known agitators.
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PORTUGAL
RELATIONS WITH THE USSR
Portuguese Foreign Minister Soares' trip to
the USSR early this month is a further indication
of the interest Lisbon and Moscow share in estab-
lishing closer ties. It was the first visit by a high-
level Portuguese official since Communist leader
Cunhal made a ministerial visit to Moscow in
October, and the first time a Portuguese foreign
minister had gone there since the Bolshevik revo-
lution. Gromyko accepted an invitiation or a
reciprocal trip to Portugal, but no date was set.
At a dinner for the visiting foreign minister,
Gromyko said the Soviets wanted to expand and
strengthen bilateral relations and, predictably,
praised Portuguese decolonization in Africa. In a
statement released at the end of the visit, the
Portuguese endorsed the Soviet call for an early
end to the European Security Conference and for
holding its concluding stage at the summit level.
Nothing was said publicly on sensitive subjects
such as Portugal's domestic politics, its role in
NATO, or the US base in the Azores.
Although no new undertakings were an-
nounced during the visit, several bilateral agree-
merits had been reached before the trip. A trade
agreement concluded on December 19 included
most-favored-nation status for each country and
provided for the establishment of reciprocal trade
missions in Moscow and Lisbon. An agreement
signed December 20 stressed the development of
direct shipping links and increasing shipments in
one another's carriers. An air agreement of De-
cember 11 had provided for direct flights between
the two countries.
These agreements do not go beyond those
that the Soviets have with many other Western
countries. While Moscow wants to improve re-
lations with Portugal, it is still moving cautiously,
in part in order to avoid arousing suspicions in
other Western nations or among anti-Communist
domestic forces in Portugal. The Soviets have
stopped well short of making an explicit or im-
plicit commitment to the present Lisbon govern-
ment and of giving it any significant economic
assistance. The subject of economic aid was raised
by Cunhal in October without eliciting a positive
Soviet response, and the evidence suggests that
Soares also failed to make any great headway.
Gromyko meets with Foreisa Minister Soares (right rear)
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Mario Soares at the Socialist Party congress
SOCIALISTS DIVIDED
When Foreign Minister Soares returned from
his visit to Communist and neutral states, he
faced some hard decisions concerning his own
political future. He must decide soon whether to
retain his cabinet post or resign and devote his
full energies to healing the deep divisions in the
Socialist Party that he heads. The party congress
last month only served to sharpen these divisions
and reveal the general disorganization within the
party.
The congress failed to resolve many key
points in the party's program, and debate on these
issues has been postponed until later this month.
The decisions that were made at the congress
reflect a marked shift to the left. The US embassy
reports that attempts by Social Democratic ele-
ments to get the congress to accept a more
moderate program were overwhelmingly rejected.
The short-term social and economic measures
adopted by the congress are more radical than
those advocated by any other major Portuguese
party, including the Communists.
The delegates devoted most of their time to
electing a slate of party leaders, but even this
question was not fully resolved. Two slates were
offered for election to the party's 151-member
national commission. One was led by Soares and
the other by Manuel Serra, a strong proponent of
direct revolutionary action.
Soares' list won by a comfortable margin-
67 percent?but the price was high. Many mod-
erate colleagues of Soares volunteered to drop off
his list and be replaced by members of the party's
left wing in order to ensure victory. The leftist
orientation of the national commission is likely to
be strengthened when the 20 seats allotted to
Socialist youth are chosen at the Socialist Youth
Congress later this month.
The leadership battle resumed shortly after
the congress when the national commission?
minus the Socialist youth representatives?
convened to select the 13-member secretariat.
The Soares slate won again but by a slimmer
margin-55 percent?than in the vote to select the
national commission at the party congress.
Even these results are temporary. New elec-
tions for the secretariat and a 39-member direc-
torate will be held after the Socialist youth repre-
sentatives join the national commission. Their
addition is likely to trim Soares' majority further
or even destroy it. Soares probably will survive as
secretary general, however, since both his name
and Serra's have always appeared on both slates.
The congress, meanwhile, has given the
commission, which is now more leftist-oriented
than the party's base, authority to complete those
portions of the party's program that were not
addressed at the congress. The draft text of the
program, for example, calls for the progressive
withdrawal of Portugal from all political and
military blocs. The possibility of establishing a
common electoral front with the Communist
Party will also be discussed. Soares hs taken a
stand against both of these proposals, but he will
be under intense pressure to radicalize the party's
program.
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CHANGING ECONOMIC POL.CY
The Portuguese apparently are leaning to-
ward a moderate economic policy based on a
retention of private enterprise. This course is in
line with the recommendations of Erik Lundberg,
a distinguished Swedish economist, who has just
completed a report for the government.
Lundberg estimates that, despite the politi-
cal upheaval, Portugal's economy grew 2 or 3
percent in 1974. He then points out, however,
that real problems have developed. Prices are up
over 30 percent compared with a year ago, un-
employment is increasing rapidly, investment has
decreased, and the balance of payments is now in
deficit. Lundberg says these problems will get
worse unless the government quickly changes its
economic policies. He recommends that top pri-
ority be given to achieving and maintaining full
employment, even though this will require ex-
pansionary measures that could add to inflation
and the payments problem.
Price increases would be slowed by means of
a price and income policy focusing on the stabi-
lization of wages. The payments deficit will be
allowed to continue, but it can be covered ' y
Portugal's large foreign-exchange reserves. These
reserves total about $6 billion, including gold
valued at the free market price. This amount
would pay for almost two years of imports at the
present rate.
Lundberg concludes that radical changes in
Portugal's economic structure should be avoided.
The government's share of the gross national
product, he believes, should be expanded some-
what from its present small size, but Portugal's
economy should continue to be based on free
enterprise. In fact, Lundberg emphasizes the need
to restore business confidence, which he recom-
mends be done by clearly limiting the govern-
ment's economic role.
Economists in the Finance Ministry re-
portedly hold views similar to Lundberg's, and his
report has given them and other moderates in
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Lisbon ammunition to use against radicals in the
government. Two of his recommendations already
have been adopted: the Portuguese stock market
has been reopened; and the government will soon
announce an economic program designed in part
to reassure the private business community.
The direction of Portugal's economy will not
be set until after the election this spring. Lund-
berg's report, however, appears to have lessened
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EC PREPARES FOR TRADE TALKS
In the coming weeks, EC officials will be
working to resolve their differences on an initial
negotiating position for the multilateral trade
negotiations that begin in earnest in Geneva next
month. The EC Council will address the problem
at the end of the month, but more than one
meeting may be necessary to reach agreement on
all major points. The EC Commission has been
working all along on a common position for the
talks, but the council had withheld negotiating
authority until the US passed its own authorizing
legislation.
The trade negotiations, which?like the
Kennedy Round of the mid-1960s--are aimed at
reducing obstacles to trade, have been under
preparation since the talks were agreed to in
Tokyo more than a year ago. Deteriorating world
economic conditions since that time have
prompted most EC members to re-emphasize the
need for starting trade negotiations, if only to
head off protectionist tendencies that could
develop in severely affected states. France and
Italy, however, have cautioned that community
concescons at the talks should be weighed against
the impact on the present poor condition of
European economies and in particular on the em-
ployment situation.
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The issues on which the community remains
most divided are the method of achieving tariff
reductions and how to handle negotiations on
agriculture. At the heart of the debate, however,
will be the question of how much independence
to grant the community's negotiators. The com-
mission and most of the members would like the
EC to go to Geneva with a mandate sufficiently
broad to allow considerable negotiating flex-
ibility. The French want to require the nego-
tiators to return frequently to the council for
instructions.
Tariff Reductions
EC ministers disagreed in December over a
formula for tariff reductions. The EC holds that
its tariff structure is generally lower than those of
the US, Canada, Australia, and Japan. All mem-
bers agree that the EC should reject reducing the
tariffs of all participants in the talks by equal
percentages?which would leave some EC tariffs
near zero. France insists that "harmonization" of
tariff levels should be the primary goal and that
tariff reductions are incidental to this. Both the
UK and Germany feel that the paramount goal is
tariff reduction and that harmonization should
simply be the vehicle.
Agriculture
All community members agree that agri-
cultural negotiations should be treated apart from
talks on industrial goods and that the basic prin-
ciples of the EC's common agricultural policy are
not subject to negotiation. The Nine agree that
their best negotiating strategy lies in proposals for
world-wide commodity arrangements. The com-
mission has proposed agreements for cereals, rice,
sugar, and milk products. The commission has
also proposed as yet ill-defined "international
disciplines" for those agricultural products that
do not lend themselves to commodity
agreements.
France supports the negotiation of com-
modity arrangements but opposes the "dis-
ciplines" because these might bring into question
the protective mechanisms of the common agr-
cultural policy. Both the British and the Germans
are skeptical about the cominission's detailed
proposals for 'commodity arrangements. London
feels that they may be too limited in scope. The
Germans want to be sure that Bonn is not made
to foot the bill for costly stockpiling arrange-
ments that commodity agreements might entail.
Other Issues
Other topics on which the council will give
guidelines include:
Non-Tariff Barriers?The community is com-
mitted to the reduction of non-tariff barriers,
although it has yet to decide on the relative
priority of the barriers to be negotiated.
Export Restrictions?The commission has
proposed a code of conduct to regulate export
restrictions; since the oil embargo, the Nine have
been concerned with a guaranteed supply of raw
materials.
Safeguards?The EC feels that existing rules
protect a nation's right to defend itself against
massive import surges but will agree to discuss
more orderly ways of implementation.
Eastern Europe?The community has agreed
to recognize the difference between state trading
and market economies in the negotiations. In
exchange for concessions, the community will
seek better access to markets and clarification of
marketing procedures.
Developing Countries?The EC is in general
agreement on the need to consider the implica-
tions of trade liberalization for developing states.
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US-USSR: DEFENSE COSTS COMPARED
Interest in the relative size and strength of
the US and Soviet military forces has heightened
in recent years with the rapidly growing size and
technological capability of Soviet forces. Differ-
ences in missions, composition, and characteris-
tics of the Soviet and US military establishments,
however, make it difficult to compare their rela-
tive size and strength. Nevertheless, the dollar
costs of Soviet defense forces and programs for
the years 1964 through 1974 can be estimated by
making rough approximations of what observed
Soviet defense activity would have cost to repro-
duce in the US in 1973, and these figures can be
compared with US outlays for those years in
1973 dollars.
The comparison relates solely to the costs of
the defense effort and not to relative military
effectiveness or capabilities. Further, the dollar
costs of the Soviet program are presented in terms
comparable to the US effort. The dollar costs so
derived do not reflect the Soviet view of their
defense spending; this view would be based upon
a different set of costs?rubles?that Soviet de-
fense planners and leaders must consider.
US outlays were larger through the Vietnam
war period, but as that war wound down, US
spending eased. As a result, Soviet costs began to
exceed those of the US in 1971. For every year
since 1971, the dollar costs of Soviet defense
Page 11
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180
100
140
120
100
80
SECRET
Dollar Cost of Soviet Programs as
a Percent of US Defense Expenditures*
Total Defense Cost
____.(US 100 Percent)
60-
40 1 1 1 1 1 I i I 1
1904 80 08 70 72 74
1073 dollar values.
180
Intercontinental
180
,
investment Cost
100
Attack
160
140
140
120
120
100
US=100%
100
US=100%
80
80
60
60
40
J I t I I I
11
40
1964
06 68 70
72
74
1964
68 08
70
72
74
800
700
600
500
400
300
200
tbo
Strategic Defense
Na. Scale for this r;riph It significantly dilloono from Mort
US=100%
1964
180
160
140
120
100
80
Operating Cost
US=100%
00?
1 40 11IIIIIIIJ
88 08 70 72 74 1964 68 66 70 72 74
180? 180
General Purpose Forces
160?
140"
120?
100
US=100%
80?
80?
401.
1
Iiittiiii
1964
66 08 70
160
140
120
100
80
60
ROTH
US=100%
40 II
72 74 1984 86 68 70 72 74
Nets, Percentages calculated from 1073 dollar velum
*Deportment of Defense data has bean adlustsd for campitible coverage.
557077 1-75 CIA
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programs were greater than comparable US de-
fense outlays. In 1974, costs?over $93 billion in
1973 prices?were about 20-percent higher than
US outlays. If the costs of pensions and reserves
are removed from both sided, 1974 dollar costs
for the Soviets exceeded the US total by about 25
percent.
Total defense outlays can be analyzed in two
ways: according to the costs of the various mili-
tary missions, such as strategic attack, strategic
defense, and general purpose forces; or according
to such costs as research, investment, and oper-
ating expenses.
Strategic Attack Forces
The estimated dollar costs of Soviet inter-
continental attack programs have exceeded US
outlays in every year since 1966?most US sys-
tems were operational by then?and were about
60-percent higher for 1974. If the Soviet periph-
eral attack forces are included (the US has no
counterpart for these forces), the gap is widened
to 120 percent.
Soviet ICBM programs cost about three
times as much as US ICBM programs in the
1964-1974 period. For 1974, the Soviet costs
were almost 4.5 times the US level, reflecting the
four new Soviet ICBM systems coming into oper-
ation. The dollar costs of US and Soviet subma-
rine-launched ballistic missile programs for the
period 1964-1974 were about the same, but by
1974 the Soviets were spending almost 30-percent
more than the US.
Other Forces
The USSR has maintained much larger stra-
tegic defense forces than the US. The cumulative
dollar costs of such Soviet programs over the
1964-1974 period were more than four times the
US level. The biggest differences were in surface-
to-air missiles and fighter interceptors. In 1974,
the dollar costs of Soviet strategic defense
programs accounted for almost eight times US
expenditures for strategic defense pregrams.
Spending by both countries on anti-ballistic mis-
sile programs was negligible.
During the 1964-1974 period, the USSR
spent steadily increasing amounts on general pur-
pose forces. By 1971, the dollar costs of Soviet
programs had surpassed those of the US; in 1974,
Soviet spending on general purpose forces was
20-percent larger than similar US expenditures.
Soviet ground forces have cost more than twice
those of the US, primarily because of the much
larger size of the Soviet army. The costs of naval
forces were about the same for both countries.
The costs in dollar terms of Soviet tactical air
forces have grown rapidly since 1969, but last
year were still only about half the US level.
Research, Investment, and Operation
The estimated dollar costs of Soviet weapons
acquisition?research, development, test, and eval-
uation plus investment?have exceeded compara-
ble outlays in the US for several years. US ex-
penditures for these purposes exceeded estimated
Soviet dollar costs by a little over 50 percent
from 1964 to 1970. Soviet dollar costs have been
higher since 1971; last year they were about
25-percent larger than US programs.
Missiles and aircraft have been the fastest
growing elements of Soviet procurement costs in
recent years. The costs of ships and boats ex-
ceeded US outlays by 50 percent over the
1964-1974 period; these costs were about one
third greater than those of the US in 1974. The
Soviets spent over three times as much as the US
on land armaments in the 1964-1974 period.
In both the USSR and the US, military per-
sonnel costs accounted for the largest part of the
operating budget. These costs in the Soviet
Union?at US 1973 pay scales?rose steadily over
the 1964-1974 period; cuts in US military forces
since 1968 have reduced comparable US expendi-
tures. In 1974, dollar costs for Soviet military
personnel were almost 50 percent higher than
corresponding US costs.
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BULGARIA-US: FRIENDSHIP OFFENSIVE
Sofia has stepped up its year-long campaign
to improve relations with Washington, presum-
ably in an effort to increase its share of the
economic benefits of detente.
As evidence of its good will, the regime
recently approved a number of long-standing re-
quests by the US ambassador for courtesy calls on
high-level Bulgarian officials. Last month, for ex-
ample, Ambassador Herz was received by Po-
litburo member Boris Velchev (a top candidate to
succeed party chief Zhivkov), and by the two first
deputy chairmen of the State Council. One of the
deputy chairman claimed that Zhivkov would be
pleased to received the ambassador at any time,
"even when there is no particular problem to
discuss."
In their talks with other US diplomats, the
Bulgarians have indicated that they are willing to
discuss a variety of issues, including cultural rela-
tions, but they continue to stress economic and
trade matters. They have presented several drafts
of proposed scientific and economic cooperation
Agreements
\ To gain
added exposure, the Bulgarians are pressing for
the opening of two additional commercial offices
in the US. They probably intend for these offices
to be used as much to acquaint US businessmen
with opportunities in Bulgaria as to promote Bul-
garian exports to this country. In addition, Sofia
has agreed to move forward with discussions on
the long-standing claims of US citizens who hold
Bulgarian pre-war bonds and may indeed be close
to making a deal on the issue.
Although the Bulgarians see opportunities
for improved trade relations with the US in a
number of areas, they are probably interested
particularly in easing their growing hard currency
debt by obtaining US technology and the low-
interest Eximbank credits that would allow them
to purchase the goods on more favorable terms.
Sofia is acutely aware that Bulgaria's trade with
the US, as compared to total foreign trade with
the industrial West, remains small. In 1973, US
exports to Bulgaria represented only one percent
of Bulgaria's total imports from developed coun-
tries in the West.
In the political sphere, the Bulgarians have
long felt themselves fo be at the bottom of the
list of US priorities in Eastern Europe. Sofia
would like to improve its position and is anxious
to have a high-level American visit sometime this
year. The Bulgarians are especially interested in
receiving Secretary Kissinger. According to the
Soviet ambassador in Sofia, the Bulgarians were
somewhat miffed that the Secretary had over-
flown their country without stopping "even for
an hour," and are sensitive to the fact that Bul-
garia is the only East European country that has
never been visited by a US secretary of state.
Meantime, the Bulgarian press has prepared
the public for a new phase in relations with Wash-
ington by publishing portions of notes exchanged
between Zhivkov and President Ford. The Bul-
garians have chosen to release only that portion of
the exchange that stresses positive economic as-
pects in bilateral relations.
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INTERNATIONAL: BREAK IN GOLD PRICE
The price of gold declined sharply last week
as the level of US demand fell short of market
expectations. In London, the price declined from
$195.25 an ounce on December 30 to $169.50 on
January 7, before rebounding to $179 an ounce
on January 9 in the face of next week's meetings
of the International Monetary Fund and Paris'
announcement that its official gold reserves
would be revalued. The lack of demand at the US
Treasury auction on January 6?only 750,000
ounces were sold?confirmed that traders had
overestimated the US market's potential, at least
in the short run.
Major gold producers have not yet reacted to
the sharp price decline. South Africa and the
Soviet Union could restrain supply sufficiently to
counter any further weakening in price. Pretoria
has left open its option to reduce sales, but it will
probably sell enough gold to cover foreign-
exchange needs. The USSR can afford to cut sales
Dollars per
troy ounce
190
180
170
160
150
140
' 130
120
110
in 1975 and is likely to do so should the market
weaken further.
The legal entry of US citizens into the gold
market and the US Treasury's policies with re-
spect to gold have been the dominant factors in
the market since mid-1974. Before US citizens
entered the market, prediction by European deal-
ers that the price of gold would hit $200 an
ounc..0 had helped drive up prices by more than
$40 from mid-October to December 30. The
Treasury Department's announcement in early
December that it would sell up to 2 million
ounces caused only a temporary drop in price.
The price of gold in 1975 will hinge on a
number of factors, including the market's percep-
tion of US intentions, the results of IMF discus-
sions on gold scheduled to begin next week, and
possible changes in other countries' policies on
gold.
London Free Market Gold Pricel
tinily
trend
US January gold
/auction announced
Jan
Fab
Man
Aug 14
US Citizens authorized to purchase gold (Dec mbar 31,1974)
iBased on the afternoon fix in London on the last trading day in each week.
2GoId was fixed at an al/lime record high of $195.25 on December 30.
Apr
May
Jun Jul
1974
Aug
Sep Oct
SECRET
Page 15 WEEKLY SUMMARY
3 4 7, 1, 9 02 11 17 13 16 17 111 720 03 2277 30 31 2 3 6 7
Nov
Jan 10, 75
Dec Jan
1975
French gold .'eserve revalued
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From the left: Arab League Secretary Riad and Foreign Ministers Rilai of Jordan,
Kliaddam of Syria. Falilni of Egypt, and PLO representative Kaddouini
ARAB STATES: MEETING :N CAIRO
The foreign ministers of Egypt, Syria, and
Jordan and a representative of the Palestine Liber-
ation Organization made only minor progress dur-
ing two days of talks in Cairo late last week. The
four agreed to meet in Damascus next month in a
further attempt to iron out differences between
Jordan and the PLO.
In Cairo, the Jordanians and Palestinians
agreed in principle to hold bilateral consultations
and to refrain from any measures or statements
that do not contribute to the "development of
relations" between Jordan and the PLO. This
represents a modest concession by both sides. The
Jordanians have refused to meet officially with
the Palestinians since 1970, when the fedayeen
were driven out of Jordan, and radical fedayeen
elements have refused to give up their plotting
against King Husayn.
In spite of the agreement, the Palestinian
news agency almost immediately accused the
Jordanians of having "dodged basic questions"
during the Cairo talks. Amman may delay any
bilateral meeting with the PLO until the Palestin-
ians cease their propaganda attacks and indicate
at least some willingness to compromise with
Jordan on political issues.
The agreement to continue consultations
among the four parties was couched in terms of
their responsibility to organize against the Israeli
military threat. The conference communique did
not suggest, however, that the Palestinians were
successful in port:-aying this threat as justification
for a return of ftayeen troops to Jordanian
territory. PLO delegates may have considered it
unwise to jeopardize Jordan's limited concession
on bilateral talks by making it an issue.
The communique avoided any reference to
Middle East peace negotiations. This was in keep-
ing with the wishes of Egyptian President Sadat,
who in late December had elicited a commitment
from Syria's President Asad to limit the meeting
to a discussion of relations between Jordan and
the PLO. Cairo had been apprehensive that Da-
mascus would use the conference as a forum to
promote Syria's preference for a Geneva peace
conference over the step-b -ste a. .roach fa-
vored b the E. &bans.
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SYRIA-LEBANON: PROMISING SUPPORT
On January 7, Syrian President Asad con-
cluded a day of talks with Lebanese President
Franjiyah by publicly promising Syria's full and
unconditional support for Lebanon. Asad's visit,
the first ever by a Syrian head of state, is the
latest of several signs that the usually strained
relations between the two governments are im-
proving.
Asad stated that Damascus would regard an
attack on Lebanon as an attack on Syria itself and
pledged in a joint communique to meet any Leba-
nese requests for help. The statement did not
indicate, however, what specific military assist-
ance, if any, Syria will provide. While Franjiyah is
probably willing to accept conventional anti-
aircraft weapons, he is likely to be reluctant to
receive weapons like SA-6 anti-aircraft missiles
that might bring Syrian or other foreign troops to
Lebanon and might invite a strong Israeli re-
action.
Franjiyah's purpose in cooperating with the
Syrians is largely to still the criticism he is getting
from domestic opponents. With Israeli incursions
into southern Lebanon a daily affair, these critics
have not been satisfied by the government's usual
response?a complaint to the UN Security Council
and a promise to strengthen Lebanese forces in
southern Lebanon. Early this week, the leader of
Franjiyah
southern Lebanon's important Shiite Muslim sect
publicly spoke of a "big probability" that Israel
would occupy southern Lebanon during the first
half of 1975.
The Lebanese have long been concerned that
the Israelis are looking for an excuse to occupy a
large part of southern Lebanon. The Israelis have
denied such an intent, but have insisted on their
right to "clear out" border areas in cases where
the Lebanese army fails to prevent fedayeen
cross-border raids on Israel.
Israeli Defense Minister Peres charged this
week that Palestinian guerrillas in Lebanon have
been reinforced by Palestinian troops from Syria
armed with anti-tank and anti-aircraft missiles. He
warned that Israel would view any Syrian attempt
to establish a "foothold" in Lebanon as the "start
of a confrontation and an extension of aggres-
sion."
the strength
of Syrian-controlled fedayeen elements in Leba-
non has grown in recent weeks, particularly
around Palestinian refugee camps. Contingents of
the largely Syrian-controlled Palestine Liberation
Army have been present for some time in the
camps and in Lebanon's remote Rashaya District
near the border with Syria.
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Asad
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ISRAEL: MORE GUIDED MISSILE BOATS
Over the next few years, the Israeli navy
plans to increase its fleet of Reshef-class guided-
missile patrol boats from six to twelve vessels.
Construction of the first of the additional craft is
to begin at the Haifa shipyard in April; launching
will probably not occur before late next year or
early 1977. The Israeli navy chief told the US
naval attache in Tel Ay! ? in mid-November that
he was able to obtain funds for the boats only
after a long and heated debate among Israeli
defense officials.
Israel has already built five Reshef-class
boats, and the sixth is nearing completion. The
Reshefs were specifically designed to operate in
the Red Sea, and four are stationed there now.
Tel Aviv had originally planned to send all six of
the original Reshefs to the Red Sea, but the
remaining two boats will apparently be assigned
to the Mediterranean.
The Reshef is based upon the smaller French
Saar-class guided-missile boat, but is more heavily
armed and has been modified to permit long-
range operations at sea. The Reshefs can carry as
many as eight Gabriel anti-ship missiles, of which
the Israelis are currently producing at least one
version with a range of 11 nautical miles. Another
version of the missile with twice this range has
been under development in Israel for several years
and may also be in service with the Israeli navy.
Israel has long been concerned ahout Egypt's
ability to close the Red Sea to ships carrying
Israeli cargoes. Israel had no Reshef boats in the
Red Sea during the last Middle East war and was
unable to challenge the Egyptian navy's blockade
of the Bab el Mandeb. The Reshefs now stationed
in the area will be able to operate in the Bab el
Mandeb, although they will be beyond the range
of continuous Israeli air cover.
Israeli Built Guided-Missile Patrol Boat
-4-
V
!,A1;k:44
HmIn
Tol.Aviv? ?
Ynto
?Sharni Osh Stutykh
SUDAN
7
Red
Sea
ETHIOPIA
557d94 1-75 CIA
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SAL/01 p,,RAF,A,A
YF.{...a=?
"0.(4,11fl,1
Gull 0(
Aden
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SOMALIA
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ETHIOPIA: CONCESSIONS ON ERITREA
The ruling military council is taking steps to
carry out its recently announced decision to
pursue a peaceful solution to the insurgency in
Eritrea Province. On January 5, the council an-
nounced substantial concessions to Eritrean tribal
and religious notables. The local leaders, who
apparently have been in contact with the insur-
gents, had presented a list of demands to govern-
ment representatives in Asmara last week. Despite
the government's concessions, some elements of
the Eritrean Liberation Front have rebuffed the
council's offer to negotiate a political settlement.
In its announcement, the council said it had
directed its forces in Eritrea to relax security
measures and to exercise maximum restraint in
carrying out their duties. The provincial leaders
had demanded that the government confine
troops to barracks and stop all military opera-
tions in the province. The council also agreed to
review the cases of all Eritrean political prisoners
and held out the prospect of granting them
amnesty or reducing their sentences; the council
excluded prisoners charged with murder or other
serious criminal offenses. The local leaders had
asked for the release of all Eritrean political
prisoners.
In response to a demand by the notables
that Eritrean students be excluded from the gov-
ernment's nationwide rural development program,
the council said it would make "special arrange-
ments" for Eritrea. The council also met an
Eritrean demand that it publicize the meetings in
Asmara. Previously, the government-controlled
media had not reported the sessions.
The council sent Information Minister
Mikael lmru to Asmara to convey personally to
the local leaders its reply to their demands. In its
statement, the council said the local leaders were
authorized to contact "Eritrean insurgents" and
to convey to them the need for a peaceful solu-
tion to the conflict. This was the first time an
Ethiopian government has referred to Front
members as insurgents; previously they had been
labeled "bandits."
Last week, before making these concessions,
the council had agreed to hold direct negotiations
Page 19
with the rebels, meeting a key demand of the
local leaders. The provincial notables, in return,
agreed to urge the insurgents to accept a cease-
fire. Local leaders are alleged to have already
begun talks with the insurgents regarding a pos-
sible truce and direct negotiations between them
and the council.
According to initial press reports, exiled
leaders of one of the Front's two major factions
issued a statement in Cairo on January 6 refusing
to negotiate with the council except to arrange
for the withdrawal of army troops from the
province. Leaders of this group reiterated their
demand for complete independence for Eritrea
and said their group was ready to increase its
combat operations. This group does not speak for
the entire Front, however, and the insurgents who
reportedly have been holding talks with the local
Eritrean leaders may not have approved the Cairo
statement.
ANGOLA: GETTING TOGETHER
The leaders of Angola's three rival liberation
groups are to meet this weekend with officials in
Portugal to discuss formation of a transitional
government that Lisbon hopes will lead Angola to
independence this year. The nationalist leaders
now appear willing to set aside, if only for the
time being, their long-standing personal and polit-
ical differences in order to revive the flagging
decolonization effort in the territory.
Following two days of talks last weekend in
Mombasa, Kenya, the three leaders?Holden
Roberto of the National Front for the Liberation
of Angola, Agostinho Neto of the Popular Move-
ment for the Liberation of Angola, and Jonas
Savimbi of the National Union for the Total
Independence of Angola?issued a joint com-
munique in which they pledged to work together
for an independent, democratic, and multiracial
Angola. In a separate agreement, the two most
important nationalist chiefs, Roberto and Neto,
who have been archrivals for more than a decade,
promised to end all hostile political and military
actions against each other.
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WEEKLY SUMMARY Jan 10, 75
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During the years of insurgency in Angola,
armed clashes sometimes occurred between the
two groups. Since the coup in Lisbon last year,
the two men, supported by rival foreign patrons,
have waged an incessant propaganda battle against
each other. For the past year or so, Roberto has
assisted a faction ,vithin Neto's organization that
has unsuccessfully sought to oust Neto from
leadership of the Popular Movement.
The Mombasa communique gave no details
on how the three leaders are likely to deal with a
number of difficult issues that seem sure to pro-
voke hard bargaining at the session with the
Portuguese. In the short time devoted to the
talks, they could hardly have concerted their posi-
tions on such matters as ground rules for political
activity and how their groups will share military
and security responsibilities during a transitional
period. Nor, in all probability, did they give much
thought to the future of Angola's 500,000 fearful
whites- -a prime concern of Lisbon. The insur-
gents' basic position is that the territory's whites
should cease considering themselves a separate
power bloc and should join one of the three
liberation groups.
Jonas Savimbi
Holden Roberto
The Mombasa agreement did suggest, how-
ever, that the rival leaders may a last be ready to
enter a transitional government, a development
the Portuguese have been trying to bring off for
some time. Until now, each of the three nation-
alists has refused to share power with the others
in the hope that he could maneuver himself into a
dominant position at the outset of a transitional
government. Such a position, each reasoned,
would go a long way toward securing his political
supremacy upon independence.
Despite the modest step forward represented
by the Mombasa accord, cooperation among the
rebel leaders could be short lived. The personal
ambitions and conflicting political ideologies of
Roberto and Neto, and the deeply rooted ethnic
antagonism between the groups they lead?repre-
senting two of Angola's largest and most powerful
tribal communities?are likely to impose severe
strains on a transitional government. How serious
the rebel leaders are about avoiding these strains
should become more evident during their coming
nenotiations with the Portuguese.
President Kenyatta
Agostinho Neto
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CAMBODIA
Fighting Back Around Phnom Penh...
The war remains within earshot of Phnom
Penh as government forces slowly push the
Khmer Communists back from the city's outer
defenses. Despite some shaky moments early in
the week, the Cambodian army's 7th Division,
with the help of heavy air support, has now
blunted a major Communist drive against the cap-
ital's northwestern defenses. Nearby government
units along Route 5 are holding their ground,
including the oil depot at Prek Pnou. The facility
is within range of insurgent gunners, however, as
are some parts of the capital itself.
COMMUNIST GAINS ALONG THE LOWER
MEKONG HAVE BEEN SUBSTANTIAL,
AND THE -MEAT TO SHIPPING HAS
FORCED THE DELAY OF A RESUPPLY
CONVOY. ALTHOUGH THE SUPPLY SITU-
ATION IN THE CAPITAL IS NOT YET
CRITICAL, CIVILIAN AND MILITARY
MORALE MAY SUFFER IF A CONVOY
DOES NOT STEAM NORTH SOON.
West of Phnom Penh, a Communist effort to
drive through governmen+ positions near Route 4
has foundered. Army units late last week cleared
Communist troops from several roadside villages
within ten miles of Pochentong airport, and since
then armored units supported by air and artillery
strikes have inflicted heavy casualties on insurgent
forces caught in the open terrain on both sides of
the highway. At week's end, some insurgent units
were withdrawing from this area although the
airport remainod the target of sporadic and inef-
fective rocket attacks.
...But Not Along the Mekong
The fighting around Phnom Penh has effec-
tively diverted government attention from the
lower Mekong River where Communist gains have
been substantial. Insurgent forces now control
Page
most of the riverbank south of the navy base at
Neak Luong and at least nine miles of Route 1
paralleling the river north of Neak Luong. Early
this week, the threat to shipping forced the gov-
ernment to delay the resupply convoy scheduled
to make the run upriver from South Vietnam.
A temporary closure of the Mekong will
work no immediate hardship on either the armed
forces or Phnom Penh's civilian population. Rice
and most fuel stocks in the capital are sufficient
to meet all needs for over a month, and enough
ammunition has been stockpiled to sustain a
heavy level of fighting for almost six weeks. Past
experience, however, shows that civilian and
military morale is affected when stocks sink low,
and the government will probably have to order a
convoy north soon. Until ground units are able to
retake some of the lost riverside positions, the air
force and navy will have to bear sole respon-
sibility for convoy security .
55700
SECRET
I 75
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fighting_. VINOM P,}EN: ?
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Poct :pntong ' ?
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Prek r
Takeo
21 WEEKLY SUMMARY Jan 10, 75
cs,
rcwiitis(usis\i,. Luong
Neak
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'N .sineC (
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)
SOUTH
miles 25
-s\
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VIETNAM: SAIGON SUFFERS SETBACKS
Communist forces completed the take-over
of Phuoc Long Province by seizing the provincial
capital of Phuoc Binh early this week. The Com-
munists have long controlled most of the remote
areas of the province and captured the three out-
lying district capitals during the past few weeks.
The province capital withstood six days of tank-
led ground assaults supported by heavy bombard-
ments from mortars, rockets, and artillery before
the 1200, or so defenders were forced to abandon
their positions.
When the Communist dry-season campaign
began in early December, South Vietnamese com-
manders in Military Region 3 decided that they
would not commit their regular forces to defend
remote outposts or isolated towns such as Phuoc
Binh. The Montagnard territorial forces defending
Phuoc Binh put up a stubborn defense, however,
inflicting heavy casualties on Communist troops
and armor. After three days of intense fighting,
the government sent a token force to the belea-
guered town to reinforce the defenders and boost
morale. to take some of the pressure off the
defenders, the South Vietnamese also increased
air strikes in the area in hopes of destroying
North Vietnamese gun emplacements and armor.
Air resupply initially was successful, but North
Vietnamese anti-aircraft defenses intensified and
forced the aircraft to drop supplies from such
high altitudes that most fell outside the town's
defenses.
The attacks on Phuoc Binh may set the
pattern for future North Vietnamese operations
Nui Ba Den
(Black Virgin Mountaiii)
during the dry season. The inibal assaults were
conducted by Communist local forces supported
by heavy artillery. When these attacks proved
unsuccessful, the North Vietnamese committed
main-force units supported by both artillery and
armor. The large number of rounds fired against
Phuoc Binh and the three district towns suggests
that ftiture government targetc will experience a
heavy pounding prior to in assaults.
Shortly after Phuoc Binh was captured, the
South Vietnamese also lost their communications
and observation site atop Nui Ba Den?Black Vir-
gin Mountain. The elimination of this government
position just outside of Tay Ninh City does not
give the Communists much of an additional mili-
tary edge in the Tay Ninh area since the slopes of
the 3,000-foot mountain have long been in their
hands. It does, however, represent something of a
psychological reverse for the government because
the mountain is considered sacred by the domi-
nant Cao Dai religious sect in Tay Ninh.
These latest Communist attacks may have
been intended to gauge the willingness and the
ability of South Vietnamese forces to hold a
target against heavy North Vietnamese assaults.
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Lopez Rega
ARGENTINA: ELEVATING LOPEZ REGA
Recent changes in President Peron's staff
strengthen the power of Lopez Rega, the contro-
versial minister of social welfare, creating almost
certain alarm among military leaders, and within
the opposition parties, and even the Peronist
movement.
The ambitious minister, who serves as
mentor to the President, will head a newly re-
structured presidential secretariat that will "co-
ordinate" all of the President's audiences with
ministers and state secretaries./
Cabinet ministers who have voiced resent-
ment over Lopez Rega's interference and over-
shadowing position will see his new post as in-
creasing his power to isolate the President and
control governmental decision making. The mili-
tary high command also can be expected to react
negatively and possibly to step up pressure for
Lopez Rega's removal. There are growing signs
that army leaders want him eased out. They ap-
parently are uncertain about how to proceed,
however, particularly since any move against
Lopez Rega might cause Mrs. Peron to resign. The
military fears that such a development would
usher in a period of instability that might neces-
sitate their active intervention. The generals want
to avoid another period of unconstitutional rule,
Even before these changes, the papal nuncio
in Buenos Aires had told the US ambassador that
Mrs. Peron was no longer turning to him for
spiritual advice and that "she now is completely
under the domination of Lopez Rega." Certainly
many Argentines believe that Lopez Rega has too
much influence over the President. If he con-
tinues to assert himself, greater efforts are likely
to be made to force his ct/o.er even at the risk of
Mrs. Peron's resignation/
25X1
LATIN AMERICA: SEEKING NEW ALLIANCES
Disarray in inter-American affairs and Latin
American skepticism about US sincerity in hemi-
spheric relations are increasing the attraction to
the Latin American countries of forms of union
or association that exclude the US.
The upbeat mood that was created last year
by US offers of a new dialogue will be difficult to
recapture at pending inter-American conferences.
Some of the more nationalist governments have
strayed so far from a spirit of cooperation that
they are proposing formal charges against the US
for alleged economic aggression. This maneuver,
led by Venezuela and Ecuador, will probably not
prosper now that US leaders are trying to correct
the di..;criminatory legislation that triggered the
reaction. Still, several governments are sympa-
thetic with Ecuador's suggestion of a boycott of
the meeting of the hemisphere's foreign ministers
set for Buenos Aires in March, and there is some
chance that this meeting will fail to come off as
planned. Even friendly Uruguay has criticized the
non-productiveness of this kind of forum and has
questioned the value of having both a foreign
ministers meeting and an OAS General Assembly
this spring.
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Despite broad disappointment in the OAS,
many Latin Americans have come to feel that the
non-institutional, informal meetings with the US
secretary of state are even less promising. They
would prefer to have US commitments occur
within a structural framework, and they will
probably make a strong effort to loosen up the
many rigidities and cumbersome procedures of
the OAS to make this a more useful, dynamic
organization.
Achieving consensus on how the US and
Latin America can form a working partnership
may, however, be impossible during this period of
friction. The US is still under heavy criticism
about the continuing sanctions against Cuba, and
bilateral difficulties seem likely to arise with some
governments over US restrictions against exports
to Cuba. Intelligence activities are still in the
Latin American news and will probably become
an even more important topic after the publica-
tion of the Spanish version of a new "expose" by
a former US intelligence agent. Various broad
issues under discussion in hemispheric working
groups remain unresolved, largely because the
Latin Americans believe the US is reluctant tr.,
promise them assistance that might be politically
BOLIVIA: LOOKING WESTWARD
The Bolivian government is reaping political
and economic gains from the continuing tension
between its western neighbors, Chile and Peru.
Two months ago, President Banzer imposed addi-
tional dictatorial controls on the grounds that he
had to prepare for a potential Andean conflict
that could involve Bolivia's national security.
Since then, he has obtained major economic
concessions from Chile, and his cordial meeting
with President Velasco in Lima last month may
lead to closer diplomatic ties with Peru.
While Banzer stands little chance of securing
his long-sought goal of access to the sea through
either country, he has persuaded the Chilean
junta to revise the 1937 treaty regulating transit
or economically unwelcome to US private Indus.
try. Particular bilateral frictions involve a wide
range of disagreements over such matters as arms
procurement, voluntary export restraints, immi-
gration, and trade.
Overall, Latin Americans feel the US is be-
coming increasingly distant, and they are ex-
ploring ways to pursue their interests without
expecting generosity from Washington. Coop-
erative efforts outside the traditional vehicles
such as the OAS therefore are having greater
appeal. Venezuela and Mexico, for example, have
begun to receive a more positive response than
first met their call for an economic system em-
bracing Latin America and excluding the US.
A number of Latin American summits have
taken place recently and more are scheduled
during the course of this year. They will be aimed
at unifying Latin America and stepping up
pressure on the US and the rest of the developed
world to change policies that the underdeveloped
consider discriminatory. 2
of Bolivian goods through the ports of Arica and
Antofagasta. The Chileans have lowered fees for
their port services below the break-even point and
have constructed two oil storage tanks for the
Bolivians at Arica.
This warming trend, combined with Bolivia's
new economic muscles of oil and natural gas,
could reorient Banzer and his successors away
from a traditional dependence on Brazil and Ar-
gentina. Although trade relations are still close,
the Bolivians have recently displayed a coolness
and independence of spirit toward both of their
eastern neighbors in current economic negotia-
tions.
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