NEAR EAST AND SOUTH ASIA REVIEW SPECIAL ISSUE: THE LEVANT AND NORTH AFRICA IN 1986

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP87T00289R000100290001-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 72
• Document Creation Date: December 27, 2016
• Document Release Date: August 29, 2011
• Sequence Number: 1
• Publication Date: December 6, 1985
• Content Type: REPORT

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1 ~ ~ ~"~`
Directorate of
~
Intelligence
Near East and
South Asia Review
North Africa in 1986
Special Issue: The Levant and
NESA NESAR 85-016
6 December 1985
?pY 41 1
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Near East and
South Asia Review
Articles
Middle East: Shifting Alliances, Enduring Rivalries
Arab approach to regional issues.
Prospects for a coalescence of Arab states to take the lead in
addressing the issues that beset the region appeared to recede during
most of 1985, and, although some regional tensions may ease in the
coming year, hidden agendas will continue to inhibit an effective
Under the leadership of Prime Minister Peres, Israel's coalition
government focused in 1985 on restoring public confidence shattered
by Likud's mismanagement of the economy and its disastrous
Lebanon policy, and in the coming year Peres will probably seek to
retain power instead of surrendering it to Likud as originally agreed.
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track policy left PLO prestige in ruins.
Despite moves that had encouraged Arab moderates to believe that
PLO Chairman Arafat finally was serious about seeking peace with
Israel, Palestinian terrorist activity increased significantly during
the year, and Arafat's miscalculation of his ability to follow a two-
to hedge against failure.
Beginning with his agreement with the PLO in February, King
Hussein has doggedly pursued a workable peace plan with PLO
Chairman Arafat and exhibits no signs of giving up in 1986, but the
limited movement so far toward negotiations with Israel and
Hussein's growing disillusionment with Arafat will encourage him
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NESA NESAR 85-026
6 December ! 985
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Syria: Exploring Options
During 1985 President Assad demonstrated fresh determination to
confront the persistent problems of Lebanon, Arab moves toward
negotiations with Israel, military preparedness, and the economy,
but ever-shifting alliances in the Arab world and the magnitude of
the issues facing Syria mean that most of his goals will remain
elusive.
Lebanon moved closer to political dissolution and territorial
partition during the 10th year of civil war in 1985 as factional
militias continued to battle throughout most of the country and
initiatives aimed at political reconciliation fell victim to the endemic
violence.
Egypt: The Politics of Austerity
President Mubarak probably looks back on his government's
performance in 1985 with a mixture of satisfaction and relief, but he
is vulnerable and recent events have made him wary of policies that
risk inflaming public opinion against the government.
The overthrow of President Nimeiri has unleashed political forces
that promise to keep Sudan in flux over the next year, but the senior
officers who ousted Nimeiri appear willing to honor their promise of
a transition to civilian rule by next year, despite the lack of
preparedness for elections on all sides.
An unprecedented combination of rising unrest and foreign
challenges coalesced to put Qadhafi at bay in 1985, and, if there is
no change in current conditions, his chances of surviving another
year are little better than even.
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Morocco: Growing Challenges
The moderate pro-Western government of King Hassan II is secure
for at least the next year, but deteriorating economic conditions
coupled with rising expectations among the burgeoning youthful
population are potential sources of discontent and could over time
destabilize the regime.
At mid-decade all indications are that President Bendjedid is
consolidating his position and continuing to put his mark on the
country, but his efforts to promote private initiative and decentralize
the bureaucracy are little more than economic and political
tinkering.
This year has been one of unprecedented challenges for the
government of President Bourguiba and Prime Minister Mzali that
have revealed the weaknesses of the regime and its inability to
resolve social and economic problems, and maneuvering in
anticipation of Bourguiba's death will sharply limit the
government's ability to act in the coming year.
After 11 months in office, Mauritania's President Taya appears
weak and vacillating in tackling his country's severe economic and
political problems, and his ability to cope with these issues is
complicated by external pressures to take sides in the Western
Sahara dispute. If he cannot show progress in the next year, he may
not survive.
Some articles are preliminary views oja subject or speculative, but
the contents normally will be coordinated as appropriate with other
o,~ces within CIA. Occasionally an article will represent the views
oj'a single analyst; these items will be designated as noncoordinated
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Middle East:
Shifting Alliances,
Enduring Rivalries
Prospects for a coalescence of Arab states to take the
lead in addressing the issues that beset the region
appeared to recede during most of 1985. One Arab
leader's complaint early in the year that there were
"too many waltzes" going on in the region proved to
be prophetic.
Leadership quarrels, conflicts of national interest, and
the intractability of the issues contributed to the high
degree of fluidity in the relations among Middle
Eastern states in 1985. Little could be agreed upon in
the multilateral meetings called during the year, and
Arab League efforts to ease tensions among regional
rivals made little headway.
Developments during the past few months-Syrian-
Jordanian rapprochement, Arafat's Cairo statement,
and movement toward an Arab summit meeting in
Riyadh pen the possibility during the coming year
of an easing in some regional tensions. Broad
agreement is likely, however, only at the cost of
blurring the hard issues. Hidden agendas will
continue to inhibit an effective Arab approach to
resolution of the Arab-Israeli conflict and will
contribute to the reappearance of enduring inter-Arab
rivalries.
Despite the emergence of numerous claimants, the
long-term outlook for effective regional leadership in
the Arab world is poor. Regional conflicts are
multiplying. No current or prospective head of state
has the political resources to put together an Arab
consensus or even a majority powerful enough to act
or to maintain its ranks against defection when
politically controversial decisions must be reached.
Multilateral Diplomacy and Its Limitations
Contentious Arab League meetings last spring and
summer indicated the depth of the divisions within the
Arab world through most of 1985. Thirteen Arab
foreign ministers and five deputy ministers met in
Tunis in late March for long and unproductive 25X1
sessions on the Iran-Iraq war, the Jordan-PLO
agreement, and other issues. Embassy sources
reported that few of the delegates could agree on
anything. A second ministerial meeting called in
Tunis in June and a followup meeting of the
permanent representatives in July produced sharp
recriminations among the participants and public
complaints that the meetin
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more divided.
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The extraordinary summit meeting called by the Arab
League in Casablanca on 7-9 August served only to
confirm the extent of the splits within Arab ranks.
The League failed to endorse the Jordan-PLO
agreement. The summit meeting produced signs of
open disagreement among the very parties to the
accord, with PLO Chairman Arafat refusing to
accept King Hussein's position that a resolution of the
Palestinian issue would be achieved only through
hard, but peaceful bargaining. Final language on the
Iran-Iraq war reflected the continuing refusal of
several states to support Iraq against Iran.
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among the diplomats, delegates, and functionaries
involved in the conference was one of futility.
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NESA NESAR 85-016
6 December l 985
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Similarly, efforts by member states to mediate
regional conflicts under the auspices of the League
failed to make headway through most of the year.
Embassy sources in Algiers reported an Algerian
attempt in February to resolve conflicts within the
PLO and then to promote a meeting between PLO
Chairman Arafat and Syrian President Assad.
was calle upon to ring an en to fighting between
the Lebanese Shia Amal militia and the Palestinians
in the Beirut refugee camps. Each of these efforts
produced a flurry of diplomatic activity but no
discernible results.
Arab Moderates and Their Radical Opponents
Throughout much of 1985, the Arab world appeared
split into moderate and radical factions. Jordan's
efforts to advance its joint peace initiative with the
Palestinians contributed to tension with Syria and to
an apparent polarization of the two sides' backers.
Damascus set out to block Hussein-primarily by
using terrorists to signal that Syria would exact a high
price if the King persisted. Damascus responded
politically as well, and each side set about enlisting
allies to bolster its position. Assad sponsored a
"radical" conclave in March that included Algerian,
Libyan, and South Yemeni representatives, for
example, in response to the moderates' summit
meeting in Baghdad a week before that brought King
Hussein together with Egyptian President Mubarak
and Iraqi President Saddam Husayn.
Developments after midyear indicated that the rival
Arab alignments amounted to considerably less than
was suggested by the rhetoric that accompanied their
emergence:
? Jordan remained vulnerable to Syrian intimidation,
and neither Egypt nor Iraq were interested in or
capable of mounting a sustained challenge to
Damascus.
? The "radicals," on the other hand, confronted near-
total incompatibility over Lebanon when the "war
of the camps" broke out in May. In late August, a
meeting in Damascus of the foreign ministers of
In May, the League
Syria, Iran, and Libya produced a communique that
the US Embassy characterized as a study in the
avoidance of delicate issues.
the meeting resulted
primarily in a review of the differences among the
participants.
The apparent polarization within the Arab world
during the past year-like previous such cleavages-
was short lived. In the past two months, Damascus
and Amman have initiated a reconciliation,
undertaken in the context of an Arab
League-sponsored mediation effort. We believe
Damascus is seeking to exploit the loss of momentum
toward negotiations with Israel to try to bring
Jordanian policy into line with Syrian views, while
Amman is trying to ease the tension with its northern
neighbor and neutralize its disruptive capabilities by
finding some common ground. Meanwhile, strains
among the "radicals" persist, as the suspension of
Iranian oil shipments to Syria and Libyan expulsions
of Syrian workers contribute to new frictions.
The Arab Agenda and Prospects for the Coming Year
The Arab-Israeli conflict and the possibility of peace
negotiations remain at the top of the Arab agenda,
but the prospects for an effective regional response to
opportunities to achieve even a partial resolution are
dim. An Arab summit meeting held in 1986 probably
would result in a consensus restating the positions
taken at Fez in 1982 and favoring an international
conference as a means to move ahead. A successful
Arab summit meeting, however, almost certainly
would be followed by the dispatch to Washington and
European capitals of an Arab delegation seeking
Western pressure on Israel and guarantees of an
outcome favorable to the Arab side before
negotiations even begin.
The prospect of stalemate in Arab-Israeli negotiations
is reinforced by the "hidden agendas" that will plague
Arab politics over the coming year. Effective
representation of the Palestinians in any negotiations,
for example, can come only after resolution of the
struggle for control of the Palestinian movement that
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has raged over four decades. Despite the 1974 Arab
League decision that the PLO is the "sole, legitimate"
representative of the Palestinian people, competition
for influence and control continues among the PLO
leadership, Jordan, Syria, and West Bank leaders
inclined to one side or another.
The proliferation of inter-Arab conflicts and rivalries
occupies an increasingly greater share of the time and
efforts of Arab League member states. In addition to
the Iran-Iraq war, the League will have to contend
with Algerian-Moroccan tensions over the Western
Sahara; heightened friction between Libya and most
of its neighbors (Algeria, Tunisia, Egypt, Sudan, and
others are involved in disputes with Tripoli); and the
conflict between Syria or its Lebanese surrogates and
Over the longer term, the prospects for the emergence
of effective regional leadership are poor. With few
exceptions, political institutions in the Arab world are
weak. Even apparently stable regimes are highly
vulnerable to domestic "constituencies" that restrict
policy change on what the Arabs call the "fateful"
issues. At the regional level, the ideological dimension
of interstate conflict has diminished-last year's
polarization, for example, pitted Ba`thist Syria,
revolutionary Libya, and fundamentalist Iran against
the Hashemite monarchy of Jordan, Ba`thist Iraq,
and republican Egypt-but the sources of regional
tension and rivalry have multiplied along with the
number of aspirants to regional leadership.
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Israel: A Year of Rebuilding
Under the leadership of Prime Minister Peres, Israel's
coalition government focused in 1985 on restoring
public confidence shattered by Likud's
mismanagement of the economy and its disastrous
Lebanon policy. To this end, the government
implemented a new and more effective economic
austerity package in July and withdrew most Israeli
forces from southern Lebanon. Peres also made
significant gains in refashioning his public image and
strengthening his leadership of the Labor Party, while
the rival Likud bloc, under the lackluster leadership
of Vice Prime Minister Shamir, was wracked by
internal disarray.
In the coming year Peres probably will seek to split
the ruling coalition and replace it with aLabor-led
government, thereby avoiding a transfer of power to
Shamir next October as agreed when the coalition
was formed. In the meantime, the government will
strive to enforce the restrictive economic policies
imposed last July and may implement additional
measures. The government also will concentrate on
preventing PLO and radical Shia attacks against
Israel and maintaining its military capability to deter
future Arab threats. Peres is not likely to depart from
past Israeli positions on major peace negotiation
issues but would try to capitalize on a favorable
response from Jordan to his proposal made at the
United Nations in October for direct negotiations
under international auspices.
Peres and Labor Ascendant
After 15 months in office, Prime Minister Peres has
emerged as the dominant political figure in Israel. He
has transformed his image from a widely disliked,
unscrupulous politician to a dignified, self-confident
leader. This is largely the result of his success in
withdrawing the bulk of Israeli forces from Lebanon
and his personal intervention to secure tough
economic austerity measures last July.
Nonetheless, the rise in Peres's popularity has not
carried over to Labor, which has improved its public
standing only marginally during the past year. A
recent poll suggests Labor would win only about three
more seats than it won in the last election in July
1984.
Hard Times for Likud
In contrast to Labor's unity and Peres's popularity,
the Likud bloc has been divided under Shamir's vapid
leadership, with the Herut and Liberal Party
components openly squabbling. Throughout 1985,
Shamir's authority was under siege by Deputy Prime
Minister Levi and Commerce Minister Sharon, and
Liberal leader and Finance Minister Moday recently
announced that he, too will seek the leadership of
Likud. Shamir's future leadership, in our view,
depends almost exclusively on Peres's abiding by his 25X1
agreement to hand over the reins of government next
The upsurge in terrorist incidents on the West Bank
and Israel last summer strained the coalition's fragile
cohesion, with Commerce Minister Sharon and other
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NESA NESAR 85-016
6 December 1985
Likud hardliners accusing Peres of lacking the
stomach to order tough security measures. Peres's
tough talk and subsequent government actions in
combating terrorism-particularly the airstrike
against PLO headquarters in Tunis and the increasing
prowess of Israeli security in breaking up terrorist
cells on the West Bank-enabled him to regain the
initiative. Peres's public standing also was enhanced
by cordial meetings with US officials during his visit
to Washington in October.
Peres's popularity at the end of 1985 was at an alltime
high. A recent public opinion poll suggests that over 25X1
two-thirds of the public approves of his performance
as prime minister. Peres's political standing in the
Labor Party also has risen. After years of bitter
feuding with Defense Minister Rabin, Peres has
emerged as undisputed party leader. Senior Labor
Party officials have told US diplomats that Peres and
Rabin consult regularly to maximize party harmony.
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October. If the coalition falls apart before then, we
believe Shamir will not long survive as Likud leader.
Shamir's ineffective leadership was manifested during
the two political crises this past fall that almost tore
apart the coalition. In the aftermath of Peres's speech
at the United Nations, Likud bungled an opportunity
to force the Prime Minister to coordinate his
negotiation strategy more closely. Although Peres had
discussed his approach with Shamir, Likud
hardliners-led by Levi and Sharon-threatened to
break up the coalition if Peres did not rule out more
explicitly PLO participation and an international
conference. Peres called their bluff, and Likud
ultimately voted in the Knesset to support his strategy
rather than bolt the coalition.
Recriminations among Likud leaders abounded
following this debacle. Shamir and Arens criticized
Levi and Sharon for making the party look inept
because of their desire to improve their leadership
credentials among party hawks. Levi, meanwhile,
faulted Shamir for poor leadership, arguing that he
was interested only in making sure nothing stands in
the way of his assuming the premiership.
The second coalition crisis occurred in mid-November
and was caused by Sharon's stinging public criticism
of Peres's negotiation strategy. Peres threatened to
dismiss Sharon from the Cabinet without Shamir's
concurrence, a move that probably would have forced
Likud out of the coalition. As with the first crisis,
Shamir stayed out of the political fray rather than
champion Likud's cause. Although a compromise
featuring a Sharon apology was worked out by
religious party members of the coalition, Sharon's
contrition is unlikely to last long, and the Likud
household will remain unruly
Likud is also suffering from sagging popularity in
Israeli public opinion polls. An early November poll
suggests that public support for Likud has declined by
almost 10 percent since the 1984 election. The drop in
Foreign and Security Policy
The ruling coalition focused on three foreign policy
issues during the past year: extricating the Israeli
Army from Lebanon; resolving the border dispute
with Egypt over Taba; and laying the groundwork for
peace negotiations with Jordan. Israel withdrew most
of its troops from Lebanon, pulling back to a security
zone iust north of the frontier controlled mainly by
General Lahad's Army of South Lebanon with
So far, this arrangement has worked well for the
Israelis. Israeli casualties have fallen off sharply, and
northern Israel has experienced no major cross-border
attacks.
The reduction of Israeli forces in Lebanon clearly
strengthened public confidence and morale after three
years of internal debate over the 1982 invasion.
Moreover, in October the Air Force destroyed the
PLO headquarters complex in Tunis in a well-
executed, long-range surprise attack dramatically
demonstrating Israel's military prowess.
The government's second priority was to improve
relations with Egypt, largely by resolving the Taba
border dispute. Peres wanted rapid progress on this
issue to improve the atmosphere for peace
negotiations with Jordan. He, therefore, pressed the
Cabinet to accept binding international arbitration of
the dispute to meet President Mubarak's condition for
holding summit talks and returning Egypt's
ambassador to Tel Aviv. Likud ministers rejected
arbitration and steadfastly advocated direct
negotiations with Egypt.
Peres's eagerness to improve ties to Egypt failed to
win enough public support to help him overcome
Likud's obstructionism. The Cabinet eventually
endorsed a plan calling for continued discussions of
options for settling the dispute, including the ground
rules for possible arbitration, but Cairo postponed the
start of talks until early December in protest against
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Likud support has benefited the rightwing Tehiya-
Tzomet and Kach Parties and not Labor.
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the Israeli raid on the PLO in Tunis. By the end of
1985, however, Taba had become less of a priority for
Peres because his attention had shifted to Jordan.
From the beginning of the coalition government,
Peres was determined to engage Jordan in direct talks
but not at the expense of the fragile political
consensus he had reached with Likud in support of
measures to heal the economy and reduce Israeli
forces in southern Lebanon. Given Likud's opposition
to negotiations involving territorial concessions on the
West Bank, Peres has had to be particularly cautious
in his efforts to arrange Israeli-Arab talks.
We believe Peres did not see much opportunity to
promote Israeli-Arab talks until after the hijacking of
the Achille Lauro, which he viewed as widely
discrediting PLO Chairman Arafat's professed
commitment to peace negotiations. Peres tried to
capitalize on the PLO's setback in his UN speech by
conveying Israel's readiness to enter direct talks with
Jordan alone or with non-PLO Palestinians, possibly
under international auspices. He clearly hoped to
encourage King Hussein to abrogate the 11 February
PLO-Jordan accord and exclude the PLO from a role
in peace talks. At the end of the year, Peres still hoped
that Amman would respond positively to his proposal
for direct negotiations.
The Economy
The formation of the coalition government was
intended, in part, to assure broad-based support for
tackling Israel's worsening economy. Seven years of
Likud rule had left Israel with soaring triple-digit
inflation, burgeoning external deficits, and a public
demoralized by ineffective government economic
policies. The coalition government was believed by
many in Israel to possess the necessary political clout
to overcome partisan differences and push through a
long-overdue austerity program.
The government acted quickly by proposing
substantial budget cuts, a shekel devaluation, and
higher energy prices. It also attempted-without
much success-to implement several wage-price
accords, selected tax hikes, higher travel fees, and
import restrictions. All of these efforts lasting well
into the summer of 1985 were merely ad hoc attempts
to reduce the budget deficit, cut foreign exchange
losses, and generate renewed public confidence.
The ineffectiveness of these measures forced the
coalition to bypass labor and business leaders and
unilaterally introduce, via emergency decrees, a new
stabilization plan on 1 July. This more comprehensive
plan called for reductions in government spending,
additional taxes, reduced public-sector employment, a
major devaluation of the shekel, and price increases to
cover subsidy reductions that would be followed by a
wage-price freeze.
Initial public reaction to the austerity program was
sharply critical, particularly by Labor Party figures
active in trade union affairs who were upset that they
had been ignored by their own Prime Minister. Aone-
day national strike, combined with the threat of
additional protests, forced the government to back
down on some of the more controversial elements of
the plan, but much of the program remained intact.
By the end of the year, the Israeli economy was
beginning to respond to the government's more
restrictive economic measures:
? Inflation has averaged under 4 percent since
August, the lowest figure in four years.
? Real wages have dropped to roughly late 1980
levels.
? The civilian trade deficit continued to drop because
of import cuts and increased exports.
? The sharp drop in foreign exchange reserves slowed
considerably during the summer, and reserves have
since climbed to $2.9 billion due to the infusion of
US supplementary economic assistance.
? Government spending was running close to planned
levels.
The Coalition in 1986
We believe Peres will seek to provoke Likud's
resignation from the coalition with the intention of
forming aLabor-led government and thereby avoid
relinquishing the premiership next October. Peres
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probably anticipates that, if he lives up to his
agreement with Likud, his popularity will steadily
erode as he is shunted to the less conspicuous jobs now
held by Shamir-Vice Premier and Foreign Minister.
He probably is also concerned that, once in power,
Shamir and Likud would score major gains in public
support if the economy begins to show signs of growth
and thus would be better able to contest Labor in the
next scheduled election in November 1988.
After exchanging jobs with Shamir, Peres's standing
in Labor also would probably decline. He would be
overshadowed by Rabin, who would benefit from the
influence and high visibility of the defense portfolio,
which he will retain throughout the government's
term. In such circumstances, Rabin would be in a
strong position to challenge Peres for the Labor Party
leadership before the next parliamentary election.
If Peres seeks to split the coalition, he will do so
sometime within the next few months to avoid
appearing opportunistic to the public for reneging on
his agreement with Shamir. He probably will seek to
engineer or manipulate a coalition crisis that would
force Likud to bolt over an issue of principle, probably
involving the prospect of imminent peace talks with
Jordan. He would then seek to form a narrow
coalition with the support of small religious and
secular parties.
The early end to the crisis in mid-November caused
by Sharon's public outburst indicates, in our view,
that the religious parties prefer to maintain the
current coalition. But they might join a narrow Labor
coalition, especially if the alternative is an early
election.
As next October draws nearer, and absent a bolt by
Likud, Peres could resign over some issue-such as
Sharon's sniping at Labor-in hopes that President
Herzog, himself a Labor man, would give him the
first opportunity to form a new government. In our
view, Peres would accept the risk of a new election
only as a last resort because of uncertainty that Labor
would do well enough to establish a coalition without
Likud.
Shamir's strategy over the next 10 months is to ignore
Labor provocations and hang on long enough to
assume the premiership. Should he conclude that
Peres does not intend to hand over power, Shamir
could seek to bolster his flagging leadership
credentials in Likud and among sympathetic hardline
groups by taking Likud into the opposition.
Foreign Policy Aims and Security Concerns
Peres's principal foreign policy objective during the
remainder of his tenure will be to engage King
Hussein in direct negotiations. Achieving progress
toward peace negotiations with Jordan would also
serve Peres's strategy of forcing Likud to bolt the
coalition because of its staunch opposition to giving up
any part of the West Bank. Likud leaders Shamir,
Sharon, Levi, and Arens will watch carefully for hints
of unacceptable concessions by Peres, but there is
little he can do independently to initiate direct
negotiations in the absence of a favorable response
from Amman to the framework for negotiations that
he outlined at the United Nations last October.
In the coming year the Israeli Army will continue to
focus on preventing PLO terrorist operations and
radical Shia attacks. Shia and Hizballah attacks-
including suicide car bombings-against Israeli
troops and their Lebanese auxiliaries in southern
Lebanon and occasional rocket attacks on northern
Israel will continue. Moreover, PLO leaders in
Amman probably will try to orchestrate anti-Israeli
unrest by Palestinian activists on the West Bank.
Israel probably will launch reprisals comparable to
the airstrike on PLO headquarters in Tunis if terrorist
attacks increase. The ruling coalition probably would
prefer to attack PLO facilities in Algeria or in North
or South Yemen, believing such action offers less risk
of harming relations with the United States and
undermining the peace process than would striking at
the PLO in Jordan. Peres and Rabin, however,
probably would support punitive action against PLO
bases in Jordan if there were a terrorist "spectacular"
or continuing smaller attacks they believed were
launched from Jordan.
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Israel's leaders are predictably concerned about the
expansion and modernization of Arab militaries and
will seek to insure that the Israeli Army is capable of
defeating any likely combination of Israel's Arab
enemies. Of particular concern to Israeli military
planners is the continued growth of Syria's Army and
its acquisition of more advanced Soviet armored
vehicles, fighter aircraft, antitank weapons, and air
defense equipment. Saudi Arabia also is purchasing
new and more capable arms, and Jordan is acquiring
relatively modest amounts of new equipment from the
United Kingdom and may soon close a similar deal
with France.
To meet this challenge, Israel believes it must
continue to procure adequate numbers of the latest
and most capable weapon systems and ensure that
Israeli training, doctrine, organization, leadership,
and battle management remain superior to those of
the Arab states. The resources required for this effort
will strain Israel's sluggish economy. The Israelis thus
will continue to look to the United States for massive
infusions of military aid.
Israel will try to ameliorate its financial problems by
encouraging its defense industries to maintain full
production lines for the indigenous development of
weapons and equipment for use by its own forces. The
Israelis will also continue to aggressively market these
products and obsolescent US-origin weapons overseas
Economic Outlook
We believe the ruling coalition is committed to
enforcing the entire range of restrictive policies
outlined in its July program. Israeli consumers seem
to have accepted the need for fiscal austerity despite
its unpleasant impact. Recent polls suggest that a
majority of the public supports the government's
program, and labor protests have virtually ceased.
Given the positive response of the economy to reform,
the government may decide to push through
additional measures during the coming year:
? According to the US Embassy, the Treasury's
proposed 1986-87 budget calls for further
reductions in planned spending of approximately
$600 million as compared with the 1985-86 budget.
Although negotiations for the 1986-87 budget are
still in the preliminary stages, the government's
budget strategy is a step in the right direction.
? Tax reforms appear likely next year as the new
budget includes far-reaching reforms to reduce the
direct tax burden by an estimated 25 percent. With
worker incentives already distorted by high
marginal tax rates, such changes would go a long
way toward reversing the recent slide in labor
productivity.
? Some wage indexation reforms are possible after the
current agreement on cost-of-living adjustments
expires next spring. The government must also end
indexing of financial assets if it hopes to further
reduce inflationary expectations.
We believe that, on balance, such measures would
have a positive impact on the economy. Whether these
measures would ultimately be implemented depends
on the response of the Israeli public. If workers
perceive that they are once again bearing the lion's
share of austerity, broad public support could wane in
the coming months. Unemployment, in particular,
could become a thorny issue. The current rate of 8
percent is already straining the tolerance of labor
leaders, and the rate is projected to climb as high as
10 percent early next year. Moreover, with inflation
low-largely due to the current price ceilings-the
battle to control inflation is by no means over.
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PLO: An Opportunity Lost?
PLO Chairman Arafat's position among Arab
moderates was significantly enhanced at the start of
1985. Just two months before, he had successfully
convened the long-awaited Palestine National Council
in Amman despite opposition from Syria and
Palestinian radicals. He also had succeeded in
removing pro-Syrian opponents from PLO councils
and replacing them with Arafat loyalists. Such
actions-followed closely by his signing of the accord
with Jordan on 11 February-encouraged moderate
Arab leaders to believe the PLO Chairman finally
was serious about seel_cing peace with Israel.
By the end of the year, however, the PLO's
international prestige lay in ruins, and Arafat's
support among Arab moderates had become tenuous.
The PLO Chairman had seriously miscalculated his
ability to follow atwo-track policy, by which he would
pursue a diplomatic solution to the Palestinian
problem while condoning military operations against
Israel. Palestinian terrorist activity increased
significantly during the year, not only by radical
groups seeking to undermine Arafat and derail the
search for a broader peace, but also by Arafat
supporters frustrated by the apparent failure of their
leader's diplomatic efforts. Such operations-capped
by the disastrous Achille Lauro hijacking in early
October-damaged Arafat's image as a man
committed to finding a peaceful solution to the
Palestinian problem and lent support to Israeli claims
that the PLO was a terrorist organization and should
be excluded from peace negotiations.
The PLO-Jordan Accord
Early in the year Arab moderates viewed the pace of
Arafat's renewed dialogue with King Hussein as a
sure indication that the PLO Chairman was ready to
move ahead on peace negotiations. In their previous
discussions during the period 1982-83, the two men
had spent over seven months trying to develop a plan
for cooperation. This time, Arafat and Hussein agreed
in less than two months on a joint strategy, resulting
in the 11 February PLO-Jordan accord. The accord
advocated:
? Acceptance of the land-for-peace principle.
? A Palestinian state united in confederation with
Jordan.
? An international conference to be attended by the
five UN Security Council permanent member states
and all parties to the conflict, including the PLO.
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The PLO would participate in a combined
Palestinian-Jordanian delegation.~~
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At the time, most Arab observers believed that
Arafat's eagerness to reach agreement with Hussein
was a result of Arafat's success at the Palestine
National Council meeting in Amman. In their view,
the PLO Chairman perceived his leadership position
and popular support among the Palestinian diaspora
as significantly strengthened, enabling him to make
controversial decisions on peace negotiations.
Arafat faced extensive opposition to the accord from
the outset. Some members of Arafat's Fatah
organization adamantly opposed close cooperation
between the PLO and Jordan. Fatah hardliners had
long suspected Hussein's intentions. They believed
Hussein ultimately planned on finessing the PLO out
of any peace negotiations. The hardliners apparently
muted their opposition for a time to see if Arafat
could win concessions-particularly US recognition-
but eventually lost patience and stepped up their
pressure on Arafat to abandon his agreement with
Hussein.
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Syrian-allied Palestinian radicals underscored their
rejection of the accord by forming a new alliance-
the Palestinian National Salvation Front. The Front
resembled the earlier Syrian-supported National
Alliance of Arafat opponents with the addition of
George Habbash's Popular Front for the Liberation of
Palestine. The Popular Front, the second-largest PLO
faction, had previously avoided choosing sides, but
Habbash's strong opposition to cooperation with
Jordan apparently persuaded him to join the Syrian
camp. The National Salvation Front was ineffective
from the beginning, however, because of internal
rivalries and divisions within each component group.
As a result, it has had little effect on Arafat.
Arafat's troubles with the contending PLO factions
worsened during the spring and summer of 1985 as a
result of efforts to arrange a preliminary meeting
between a joint Jordanian/Palestinian delegation and
US Assistant Secretary of State Murphy. US
insistence that the Palestinian representatives have no
clear association with the PLO generated great
controversy among senior Fatah officials. The
hardliners rejected the idea of non-PLO
representatives because they believed this was the first
step in precluding PLO participation in future peace
negotiations. US Embassy officers believed Arafat
was enthusiastic about the meeting and tried to
convince his senior aides that it could help the PLO
establish direct contact with the United States. Arafat
and his Fatah lieutenants ultimately agreed to
propose seven candidates to participate in the joint
delegation, although at least four of them had clear
PLO ties.
The subsequent debate over whether these candidates
met the US criterion raised new questions about
Washington's interpretation of whether membership
on the Palestine National Council constituted
affiliation with the PLO. Israeli officials made no
distinction between the two organizations and rejected
all of the PLO-proposed candidates except for two
from the West Bank and Gaza Strip. US officials
asserted, however, that Israel would have no veto over
the list-encouraging PLO leaders to believe a
compromise might be arranged.
Palestinian optimism waned, however, as PLO leaders
awaited Washington's response to the PLO-proposed
list. During the prolonged delay, Fatah hardliners
began to press Arafat to abandon the diplomatic
option, arguing that the United States had rebuffed
the PLO's "good faith" effort toward peace.
operations on the West Bank.
Increased Terrorist Activity
Increasing Palestinian disillusionment over the
prospect for peace negotiations resulted initially in an
upsurge in anti-Israeli violence on the West Bank,
much of it by Palestinian youths acting on their own.
Israeli intelligence noted that the increased number of
PLO officials in Jordan-a byproduct of Hussein's
efforts to encourage Arafat to cooperate in
negotiations-were directing stepped-up terrorist
Arafat's diminished control over the PLO since its
component groups split into pro- and anti-Arafat
camps in 1983 has complicated his efforts to rein in
PLO operatives. Moreover, we do not believe Arafat
sees it in his interest as PLO Chairman to do so.
Arafat's prime motivation is to preserve his leadership
position within the PLO, and to do that he believes he
must maintain the cohesion of Fatah, the largest of
the eight PLO factions. Arafat probably has
selectively supported Fatah hardliners' demands to
carry out operations to demonstrate that the PLO is a
viable national liberation movement that neither the
United States nor Israel can ignore in settling the
Palestinian problem.
The PLO Blunders
Arafat clearly miscalculated the effect on his
international credibility in continuing to pursue his
two-track policy after signing the 11 February accord
with Jordan. The PLO's assassination of three Israeli
yachtsmen in Cyprus in late September and the
Achille Lauro hijacking staged by an Arafat loyalist
discredited the PLO around the world. The sudden
cancellation of aJordanian-arranged meeting
between British officials and a joint Jordan-PLO
delegation-because the PLO would not publicly
recognize UN Resolution 242-further damaged
Arafat's credibility and outraged King Hussein and
Egyptian President Mubarak. The two men believed
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they had gone out on a limb for Arafat in promoting
the PLO as an essential participant in peace
negotiations.
Arafat has since tried to minimize the PLO's
involvement in terrorist operations and to repair some
of the damage to its international reputation. His
public declaration in Cairo in early November
affirming an end to terrorism "outside the occupied
territories" was designed to mollify Hussein and
Mubarak and get the PLO back onto the diplomatic
track. The careful wording of the declaration,
however, almost certainly guarantees that the
Palestinians will attach many different-and self-
serving-interpretations to "resisting the occupation."
Some PLO factions are likely to target Israeli
interests not only in Israel and the occupied
territories, but also elsewhere in the region and in
Europe. US citizens and facilities also are likely
targets because of PLO anger over Washington's
support for Israel.
Wbat Is Next for Arafat on the Negotiation Front?
We believe that Arafat is determined to prevent any
party from usurping the PLO's role in peace
negotiations, and that he will try to maintain his
dialogue with King Hussein as well as the 11
February accord. To these ends, Arafat will continue
to toy with accepting UN Resolution 242 and
selecting non-PLO Palestinian representatives for a
joint delegation. The PLO Chairman almost certainly
will resist making firm commitments, relying on the
usual arguments that the timing is not right or that he
must first check with senior PLO officials before
making such decisions.
Arafat is convinced that Hussein will not enter peace
talks alone, and he doubts that the King could
convince credible West Bank leaders to join Jordan
without the PLO to negotiate with Israel. We believe
Arafat would order selective assassinations of West
Bank leaders to discourage them from challenging the
PLO's mandate as the "sole legitimate representative
of the Palestinian people."
At present, Arafat retains strong backing among
West Bankers, Gazans, and Palestinians in the
diaspora. US Embassy officers report that he
continues to be viewed as the only Palestinian leader
with enough Arab and international credibility to seek
an equitable settlement for the Palestinian people. A 25X1
sharp increase in the PLO's involvement in terrorist
activity, however, may eventually convince some West
Bank notables that Arafat cannot or will not adopt an
effective political strategy to negotiate an end to
Israel's occupation of the territory
PLO Financial Troubles
Arafat's popular appeal in the occupied territories
also may be tested by the PLO's growing financial
problems. The Palestine National Fund, the financial
arm of the PLO, has publicly reported large operating
deficits and is drawing down reserves to make ends
meet. The rising red ink stems from the PLO's
increased expenses since it was expelled from
Lebanon and from reduced generosity by Arab states,
particularly those in the Persian Gulf whose oil
revenues have sharply declined.
We believe that the-money shortfalls are sharply
diminishing the PLO's traditional role as a social
welfare organization for the Palestinian people. At a
time when Palestinians are being hard hit financially
for a variety of reasons-reduced job opportunities in
Israel, Jordan, and the Gulf states and cuts in the
UN's refugee budget are two prime examples-the
PLO cannot step in and offer employment alternatives
or substantial aid. Arafat, in particular, may be
suffering as financial difficulties not only test his
traditional sources of patronage, but also take up
more of his time and energy.
The PLO's terrorist capabilities will not be weakened
by the financial crunch. The upswing in PLO-related
violence over the past year shows it has been little
affected. The funds needed for a hijacking, bombing,
or West Bank operation are insignificant compared
with the available reserves. Moreover, the PLO
leadership appears to be going to great lengths to
ensure that its military arm remains the number-one
budget item. Arafat, for example, bypassed normal
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PLO channels on one occasion to deposit Saudi aid 25X1
worth $86 million directly into military accounts.
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Looking for a Patron
Arafat almost certainly will not be able to reunify the
various PLO factions, nor do we believe he cares to do
so. A reunification of the organization would increase
the problems he already faces within Fatah over his
freewheeling style and would strengthen demands for
a collective leadership.
The PLO Chairman may explore the possibility of
reconciling his differences with the Democratic Front
for the Liberation of Palestine, the only major PLO
faction besides Fatah remaining outside the Syrian
camp. We believe Arafat would find reconciliation
with the Democratic Front attractive because it would
extend his leadership authority beyond Fatah.
We cannot rule out the possibility of Arafat trying to
reopen contacts with Syria if his relations with
moderate Arab states sour. Soon after the Achille
Lauro incident, a senior Arafat adviser, Hani al-
Hassan, publicly spoke of this possibility. US
Embassy officials. in Damascus, however, say that
most Syrians believe the personal animosity between
Arafat and President Assad is so intense that
reconciliation seems impossible. We believe Arafat
would seek out Assad only as a last resort. A
rapprochement would require major, humiliating
concessions by Arafat that would severely limit his
freedom of action and make the PLO a Syrian proxy.
Arafat is more likely to turn to Syria's archenemy,
Iraq, for support if moderate Arab states turn him
away, particularly if King Hussein orders the PLO
out of Jordan. He is already taking advantage of
Iraq's willingness to house PLO fighters, who are
being asked to leave other host countries for fear of an
Israeli airstrike similar to the raid on PLO
headquarters in Tunis. Arafat also has considered
relocating PLO headquarters from Tunis to Baghdad.
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Jordan: In Pursuit of Peace
King Hussein has been conducting an active
diplomacy since the meeting in Amman in November
1984 of the Palestine National Council. Through a
series of moves, beginning with the 11 February PLO-
Jordan agreement, the King has doggedly pursued a
workable peace plan with PLO Chairman Arafat and
exhibits no signs of giving up in 1986. Even so, the
limited movement in 1985 toward negotiations with
Israel and Hussein's growing disillusionment with
Arafat will encourage the King to hedge against the
possible failure of his initiatives. We believe Hussein
will continue to try to increase Jordan's influence with
West Bank leaders in the hope of persuading them to
join Jordan in negotiations if Arafat remains
unyielding, realizing that fear of PLO-directed
assassination attempts will discourage their break
with Arafat. In our view, the King also will continue
his efforts to reduce the near-term threat Damascus
poses to Jordanian security by seeking to improve
relations with Syrian President Assad in the coming
year.
King Hussein's policy objectives will be constrained
by Jordan's dependence on Arab economic aid, used
both to keep the country's economy afloat and to
bolster its armed forces. Despite its growing trade
with the West and recent declines in Arab aid, Jordan
cannot afford to alienate its key Arab supporters. In
particular, Jordan may seek extensive Saudi funding
to purchase European fighter aircraft if US arms
remain unavailable.
Search for Peace
In our judgment, the King resumed his dialogue with
PLO Chairman Arafat in 1985 in the hope that
Arafat's alienation from Syria would make him
vulnerable to Jordanian pressure for greater flexibility
on key peace issues. The King also viewed President
Reagan's reelection and the selection of Labor Party
leader Shimon Peres to head Israel's coalition
government as particularly auspicious signs. Hussein
clearly hoped these developments would facilitate his
efforts to encourage greater understanding of and
support for moderate Arab views in the United States
and possibly within Israel.
Hussein's decision to allow the long-delayed Palestine
National Council to meet in Amman in late 1984 was
intended to encourage Arafat to break with Syrian-
sponsored Palestinian radicals and to cooperate with
moderate Arab leaders to find a formula for peace.
US Embassy reporting suggests the King saw Arafat's
actions at that time as evidence that he, too, wanted to
pursue this course. Three months later Hussein and
Arafat worked out a joint plan of action embodied in
the PLO-Jordan accord. Hussein's agreement to allow
PLO offices to transfer to Amman also was intended
to encourage Arafat to demonstrate greater flexibility
on peace negotiation issues.
Shortly after the accord was signed, King Hussein
and Egyptian President Mubarak urged the United
States to meet with moderate Palestinians to explore
peace issues. In meetings with US officials in
Washington in the spring, both leaders proposed
"prenegotiations" between the United States and a
joint Jordanian-Palestinian delegation.
According to US Embassy reporting, President
Mubarak promised that he and King Hussein could
"deliver" the PLO if, as a preliminary step, the
United States persuaded Israel to acquiesce to
Jordanian-Palestinian-US talks. This led to Jordan's
formulation of a step-by-step approach whereby a
preliminary meeting between US officials and a joint
Jordanian-Palestinian delegation-without PLO
members-would be followed by Arafat's public
acceptance of UN Resolutions 242 and 338; a
meeting between the United States and PLO officials;
and, finally, negotiations with Israel at an
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international conference attended by the five UN
Security Council permanent member states and all
Arab parties to the conflict including the PLO.
down on Fatah Western Sector activities, limit the
frequency of Arafat's visits, and restrict the
movements of key senior Fatah officials. Jordanian
security already has ordered several Western Sector
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The composition of the joint Jordanian/Palestinian
delegation presented a major stumblingblock. Hussein
insisted that Arafat and senior PLO officials allow
Palestinians not clearly identified with the
organization to serve on the delegation, arguing that
the United States and Israel would not allow other
candidates. PLO leaders eventually agreed to include
some Palestinian independents among the candidates
proposed for the joint delegation, but Arafat's
insistence on PLO participation frustrated and
angered the King.
As efforts to arrange the meeting stalled by early
autumn, the PLO made three major mistakes-killing
three Israeli yachtsmen in Cyprus in late September,
hijacking the Achille Lauro in October, and failing to
follow through with aJordanian-arranged meeting
involving PLO and British officials. Even though he is
outraged at Arafat, Hussein appears determined to
continue pursuing negotiations. Jordanian officials
told the US Embassy they strongly urged Arafat in a
recent meeting to get his organization under control
and to accept UN Resolutions 242 and 338 and to
discontinue terrorist operations as a good faith
gesture.
Hussein's Pursuit of Peace in 1986
Despite his frustrations, King Hussein sees no
alternative to working with the PLO to retain credible
Palestinian backing for his efforts toward negotiating
with Israel. Despite the recent setbacks, he is unlikely
to abandon his agreement with Arafat made last
February, and he will continue to press tough
conditions for partnership with the PLO in future
talks with Arafat. King Hussein appears determined
to make progress with his peace initiative before Peres
turns over the Israeli prime-ministership in the fall of
1986 to Vice Prime Minister Shamir, leader of the
hardline Likud.
The Israeli raid on PLO headquarters in Tunis
probably will prompt the King to check any further
growth in the PLO's presence in Jordan for fear of
similar Israeli reprisals. Hussein probably will crack
and other PLO personnel to leave the country.
Jordanian officials continue to state publicly that
Jordan will not enter peace negotiations with Israel
without the PLO, but we believe Hussein may try to
increase Jordan's influence with West Bank leaders in
the hope of persuading them to join Jordan in
negotiations if Arafat remains unyielding. Hussein is
acutely aware of the extensive support for Arafat and
the PLO among West Bank leaders and presumably
does not expect them to move away from the PLO
soon. We estimate that major West Bank leaders are
unlikely to break with Arafat to join the King in
negotiations with Israel during 1986. West Bank fear
of PLO-directed assassination attempts will continue
to be an overriding constraint, in our view.
The King's Syrian Option
The King hoped that his appointment of Zayd al-
Rifa`i as Prime Minister last April would smooth
relations between Damascus and Amman because of
Rifa'i's extensive Syrian contacts and because he was
believed to favor closer relations with Syria. Rifa`is's
active involvement in the King's dialogue with Arafat,
however, deepened Syrian distrust of Jordanian
policy. As a result of the dialogue, Jordan became the
target of increased Syrian-sponsored Palestinian
terrorism, with attacks staged against Jordanian
officials at home and abroad.
The limited movement toward negotiations in 1985
and Hussein's disillusionment with Arafat probably
have encouraged the King to seek to improve relations
with Damascus. Recent discussions in Riyadh
between Syrian and Jordanian officials evidently did
not produce major agreements, but the King
presumably sees the dialogue as a way of reducing the
near-term threat Damascus poses to Jordanian
security. Barring serious, early movement toward
negotiations with Israel-which Hussein undoubtedly
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regards as unlikely-the King probably will continue
efforts toward a rapprochement with President Assad.
Iraq is concerned that Jordan's dialogue with Syria
will weaken the support Baghdad receives from
Jordan and other Arab moderate states. The Iraqis
have a stake in encouraging the Hussein-Arafat
initiative in 1986 to frustrate Syria's aims and
ambitions. Moreover, the Iraqis anticipate that the
fundamental differences between Jordan and Syria
over the search for peace will encourage Jordan to
remain aligned with Iraq. According to the US
Embassy, King Hussein has kept Iraqi leaders fully
apprised of the status and details of the Jordanian-
Syrian talks.
Economic Constraints
King Hussein's ability to move boldly in foreign policy
is limited by Jordan's harsh economic realities.
Despite its growing trade with the West and declines
in Arab aid, Jordan's economic links to the Arab
world remain strong. The King cannot afford to
alienate his key Arab supporters in pursuit of
negotiations with Israel:
? Annual Arab aid is at least $550 million, consisting
largely of Saudi Arabia's $357 million contribution
as pledged in the 1978 Baghdad accords. This
publicly announced Arab assistance amounts to at
least 80 percent of Jordan's foreign aid receipts.
Arab support for Jordan's purchases of arms or oil is
not officially reported.
? About 50 percent of Jordan's exports go to Arab
countries, while 25 percent of its imports are of
Arab origin. Oil is the major import-it amounts to
almost 90 percent of all imports from Arab states-
with most of it purchased from Saudi Arabia on
easy terms.
? At least 300,000 Jordanians work abroad, largely in
the Gulf states. These workers remit over $1 billion
annually-Jordan's largest source of foreign
earnings.
difficulties. Worker remittances coupled with
Baghdad payments have gone a long way toward
offsetting Jordan's trade deficits of $2-2.5 billion
annually the past few years. Moreover, Arab
participation was a key factor in the syndication of
two loans totaling $365 million in 1984 and 1985.
Jordan's financial position, nonetheless, is beginning
to fray. The International Monetary Fund reported
that Jordan's balance of payments moved into a
deficit in 1984, due in part to a $140 million reduction
in Arab aid. To help cover shortfalls in the capital
account, in 1984, official reserves fell by nearly $300
million.
We believe that Jordan's balance of payments may
have improved somewhat in 1985, but this will remain
a key concern for King Hussein over the next few
years:
? Arab aid picked up in 1985 largely because of
grants from Oman and Abu Dhabi, but Jordan
cannot always count on such help. Kuwait is
becoming less reliable in honoring its aid pledges,
and even Saudi Arabia has delayed some aid
payments.
? Worker remittances grew a surprising 10 percent in
1984 as returning workers brought home assets.
Amman is expecting remittances to begin leveling
off as more Jordanians return home from the
recession-plagued Gulf states.
? Jordan will have great difficulty in reducing its
annual trade deficit much below the $2 billion
mark. Imports cannot be cut much further without
constricting industrial output, and export growth
may cool because of lower prices for key exports and
reduced exports to financially strapped Iraq.
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? Debt service obligations are climbing sharply, with
interest payments probably above $200 million.
Jordan's officially reported debt-which excludes
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1981 and now exceeds $2.5 billion. 25X1
Arab economic support has been instrumental in
keeping Jordan afloat during a period when many less
developed countries have run into financial
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Tightening financial constraints-although not yet
serious-are depressing the domestic economy.
Recently revised economic statistics suggest that
GNP growth has dropped below 2 percent per year
since 1982. This is well below the 7-percent rates
achieved throughout much of the 1970s and early
1980s and represents a decline in per capita terms,
given Jordan's annual population growth of nearly 4
percent. Jordanian officials recently told the US
Embassy in Amman that declining Arab aid has
forced the government to reduce spending.
The economic slowdown has yet to make a major
impact on living standards, as both inflation and
unemployment remain low. Nonetheless, Amman is
keenly aware that several problems-such as poor job
opportunities for new university graduates and
returning workers and growing demands on limited
water resources-will become more serious as the
decade draws to a close.
Amman hopes to combat its economic weaknesses by
strengthening the private economy. One of the Rifa`i
government's first moves last spring was to relax
government control over the economy. More recently,
the Jordanian Cabinet restricted imports of goods that
are domestically produced and granted tax incentives
to export industries. Similar moves-particularly to
improve the operation of inefficient state-controlled
enterprises-will dominate economic policies over the
coming year. The five-year plan that begins in 1986 is
structured to boost the domestic economy by
significantly increasing investments.
Jordan's strategy is a long-term one, recognizing that
highly expensive efforts to increase self-sufficiency
cannot be accomplished overnight. Jordan's limited
resource base-human capital will remain its most
important asset-suggests that Amman will continue
to rely primarily on Arab aid. Western countries-the
United States in particular-are also likely to be
force to prevent a situation similar to 1970 when PLO
fighters in Jordan threatened the regime's stability.
Jordan also seeks greater deterrent capability to resist
veiled Syrian military threats. Undertaking these
efforts will depend heavily on the willingness of
patrons such as Saudi Arabia to continue to provide
financial support. The King is acutely aware that
acquisition of new weapon systems also is important
to ensure that the career military-his chief political
support~ontinues to back him.
In 1985 the Jordanian military helped Jordanian
security monitor the activities of PLO fighters
returning to Jordan. Eventually most of these fighters
were sent to a camp adjacent to the Army base at Az
Zarqa, northeast of Amman, where Jordanian forces
ensured that they did not receive major wea ons and
did not undertake operations against Israel.
The Army also has been engaged in incorporating
newly delivered Soviet air defense equipment-SA-8s,
SA-13s, SA-14s, and ZSU-23-4s-into its units.
Some of this air defense equipment continues to arrive
from the USSR.
By the end of 1986, Jordan will have completed the
integration of Soviet air defense equipment into the
Army and will have made significant progress in
upgrading its air defense radar network. These
improvements would not prevent Israel from striking
PLO targets in Jordan, but they might enable the
Jordanian military to inflict damage on Israeli
aircraft if they struck PLO sites in the country.
In September, Jordan announced it would buy about
$360 million in arms and equipment from the United
Kingdom, including air defense radars, tank
ammunition, combat engineering gear, and
modernization kits for tactical aircraft.
approached for increased support.
Jordan's Military Options
Jordan's financial crunch is restricting King Hussein's
efforts to strengthen both the internal security and
deterrent capabilities of the Jordanian armed forces.
Specifically, Jordan must maintain a credible military
In 1986, Jordan's military modernization will
continue, albeit at a slower pace. If significant
progress is achieved toward peace negotiations with
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Israel, Jordan will hope for US Congressional
If Congress does not approve such a sale, Jordan may
negotiate with the United Kingdom, France, and the
USSR for some equipment, particularly air defense
weapons and new aircraft. Jordan would purchase
fighter aircraft from the United Kingdom or France
only if a major patron such as Saudi Arabia provided
the required funding. Otherwise, only the USSR
could offer acceptable terms to Amman.
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Syria: Exploring Options
During 1985 President Hafiz al-Assad demonstrated
fresh determination to confront the persistent
problems of Lebanon, Arab moves toward
negotiations with Israel, military preparedness, and
the economy. Assad is a masterful tactician prepared
to explore all options that would enable Syria to play
the central role it covets in inter-Arab deliberations.
Despite Assad's considerable political skills, ever-
shifting alliances in the Arab world and the
magnitude of the issues facing Syria mean that most
of his regional goals will remain elusive.
On foreign policy issues, Assad has shown a
willingness to make tactical accommodations with his
adversaries, primarily to win short-term political and
economic benefits, but also to shed Syria's rejectionist
image. Despite Assad's apparent flexibility, aimed at
establishing Syria as the pivotal regional power, he
has not been able to initiate policies that would win
broad Arab support. As a result, leadership of the
Arab world continues to elude Assad, and Syrian
goals are pursued largely through coercion and
intimidation.
The Syrian economy continued its dismal
performance, suffering from incompetent managers,
corrupt officials, and the malaise and inefficiency of a
centrally planned system. One bright spot this year
was the naming of an economic reformer as Minister
of Economy and Foreign Trade. Despite the
implementation of some pragmatic reforms, Syria's
economic distress will not be easily overcome in the
near term.
Syrian efforts to expand and reorganize its military
forces moved ahead in the past year as part of Assad's
quest to achieve an Arab-Israeli strategic balance.
Military expansion to date has enabled the minority
Alawite regime to better ensure its survival, but it has
not significantly reduced Tel Aviv's strategic
advantage. Military parity with Israel-a Syrian
condition for a negotiated settlement to the Arab-
Israeli conflict-remains an unrealized dream.
Assad's renewed activism indicates that efforts to
make progress on basic Syrian goals are back on track
after Assad's health crisis of late 1983 and early 1984,
which triggered the most serious political and military
challenge of his tenure. Despite the destabilizing
events of 1984, Assad has not moved to resolve the
troublesome succession issue. Nagging concerns about
his health and the vagaries of an untested succession
process will be a prime focus in the coming year for
Assad's friends and foes.
Getting a Grip on Lebanon ...Almost
Most of Syria's political energies continue to be
expended on Lebanon. Damascus has claimed credit
for forcing the Israeli withdrawal from Lebanon last
spring and is now seeking to translate that success
into a more comprehensive settlement of Lebanon's
decadelong civil war. Syria has come close on several
occasions to forcing Lebanon's contending factions to
the negotiating table, but the basic intractibility of
Lebanon's domestic problems will keep a political
accommodation out of reach for some time.
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The hallmark of Syrian efforts in Lebanon this past
year has been the decision to bypass traditional
politicians and instead deal directly with younger
militia leaders who wield real power in war-ravaged
Lebanon. This approach, while more realistic than
previous Syrian efforts, is flawed because it excludes
the traditionally powerful Sunni community, which
does not have an effective militia. Despite their
military weakness, the Sunni community is politically
significant because of its dominance in the Arab 25X1
world and the fact that Saudi largess to Damascus
could be linked to Syria's treatment of Lebanon's
Sunnis.
Syria's most significant breakthrough in Lebanon, the
establishment of a cooperative relationship with the
traditionally anti-Syrian Christian Lebanese Forces
Secret
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militia, has gone sour over the last several weeks.
Christian second thoughts about Syrian proposals that
reduce Christian power and increase Syrian influence
threaten to unravel the agreement, which also involves
the Shias and Druze and which Damascus has touted
as the formula that will end the civil war. The Druze,
who have been busy loosening their ties to Damascus,
are only slightly less uncooperative than the
Christians, leaving Damascus in the unenviable
position of making the somewhat militant and unruly
Shias the cornerstone of a Lebanese settlement.
In addition to the difficulties posed by bringing
Lebanon's principal factions to heel, Syria has had to
grapple with other spoilers represented by pro-Arafat
Palestinians and Iranian-backed Muslim
fundamentalists. Damascus achieved some success in
routing Sunni fundamentalists in Tripoli, where
Syrian influence and military presence are strong.
The results have been less satisfactory, however, in
dealing with elements operating in areas where Syrian
troops have limited access and have had to rely on
Lebanese surrogates.
The bloody monthlong siege launched by the Syrian-
backed Shia Amal militia against Beirut-based
Palestinian fighters last June failed to eliminate
Arafat supporters and caused a furor among Syria's
friends and foes. Damascus ignored the outcry and
has given every indication that it plans to pursue its
Palestinian solution at a more convenient time.
Amal's poor showing in the fighting resulted in an
immediate effort by Damascus to equip and train the
Shia militia, presumably to carry the war to Arafat's
Damascus, nonetheless, is reluctant to move against
the fundamentalists for fear of further upsetting its
relationship with Tehran. The economic benefits of
Syria's alliance with Iran have declined dramatically
during the last several months, but the political
advantages continue to be significant. Iran's
determination to pursue its war with Iraq, Syria's
nemesis in the region, remains the principal reason
that Syria tolerates Tehran's unwelcome activities in
Lebanon.
The Syrian-Iranian relationship is inherently
paradoxical, based primarily on mutual hatred of
Iraq. A deepening economic crisis in Syria during the
coming year combined with stepped-up
fundamentalist activity in Lebanon could prove too
much for the relationship.
Stalemating the Peace Initiative
One reason Syria has been eager to close the file on
Lebanon is to enable Damascus to monitor more
closely the Jordanian-PLO peace initiative. Syria is
determined not to allow other Arab states to break
with a policy of confrontation toward Israel or to
accept bilateral settlements. Damascus has taken
advantage of recent Saudi inducements to make
overtures to Jordan. Damascus sees closer ties to
Amman as a means of insinuating itself into Arab
deliberations on negotiations with Israel to limit
Jordanian options and encourage King Hussein to
abrogate his 11 February agreement with the PLO.
fighters in the south.
Dealing with the Iranian-backed radical Shia
fundamentalist Hizballah movement is proving to be
especially difficult and will be a continuing problem
until Damascus is prepared to sever its ties to Tehran.
Syrian leaders are angered by Hizballah's activities in
Lebanon that obstruct Syrian efforts to restore a
semblance of order there. Hizballah's initial
usefulness in spearheading the resistance to the Israeli
presence in the south has been overtaken by Amal and
other smaller groups associated with Syria, which
provide most of the suicide bombers used against the
moves towar negotiations wit Brae remain
stalemated, Damascus will soft-pedal its objections to
the agreement and pursue reconciliation with Jordan.
If Hussein attempts to revitalize the peace initiative,
Assad is likely to renege on recently signed economic
and commercial accords and resume subversive
activities against Jordan. ~~
Israeli security zone.
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Syria-Iraq: A Little Cooperation Between Enemies
Syria's willingness to cooperate with recent Saudi-
sponsored Arab reconciliation efforts is geared to
removing obstacles to Syrian participation in an Arab
summit meeting and positioning itself at the core of a
new Arab coalition that would emerge if the US-
Jordanian-PLO peace initiative collapsed. This
strategy appears to explain Assad's cautious steps
toward a tactical accommodation to Iraq. Assad also
may be toying with improving ties to Baghdad as an
alternative to Syria's souring relationship with Iran.
Rapprochement between Damascus and Baghdad
appears to be out of the question. Intense personal
hatred between Assad and Iraqi President Saddam
Husayn and broader regional rivalry between Syria
and Iraq probably preclude anything but a tactical
accommodation. In the near term, however, there are
economic benefits to be reaped by improving
relations.
Suspension of Iranian oil shipments to Syria and
continuing debt problems are the principal factors
pressing Damascus to reassess its hard line toward
Baghdad.. The loss of Iranian oil has forced Syria to
slow refinery operations and to use scarce foreign
exchange to purchase oil on the spot market. A thaw
in the Syrian-Iraqi relationship could replace Iranian
oil with Iraqi supplies and provide Baghdad with
increased revenues to finance its war with Iran.
Despite Syrian disenchantment with Iran, it is not
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Three would-be Lebanese
suicide bombers pose in.front oJ'
a montage o./'other martyrs
displayed with a portrait oJ'
clear whether Damascus will dump Tehran-
Baghdad's minimum demand for improved relations.
the oil and was able to get Iran to forgive nearly $1
billion in debt and later to convert another $1 billion
Syria's Troubled Economy
Overall, the Syrian economy is in dismal shape after
suffering three years of real GDP decline and five
years of balance-of-payments deficits. Syria's
multiple exchange rate system is badly in need of
reform, and the Syrian pound should be devalued by
at least 50 percent. The government is running out of
foreign exchange at a time when its lucrative oil
relationship with Iran is unraveling and its aid
relationships are coming to an end.
Under the Baghdad Agreement of 1978, Arab states
pledged to provide Damascus up to $1.85 billion a
year for 10 years. Saudi Arabia is the only country
meeting its commitment, providing $528 million a
year in aid.
Damascus's other major source of nonmilitary aid has
been its oil agreements with Iran. For each of the last
three contract years, Iran agreed to provide 1 million
tons (20,000 b/d) of free oil and another 5 million tons
(100,000 b/d) at a $2.50 per barrel discount. The free
oil plus the discount equaled about $300 million a
year in direct aid. Syria, however, delayed paying for
in debt into interest-free loans.
The Iranian-Syrian oil relationship has been troubled
for over a year because of Syria's inability to pay. In
addition, a cooling of the Iranian-Syrian political
friendship and Iran's need for cash has cut Iranian
tolerance for Syrian tardiness on payments. Iranian
oil shipments to Syria have been suspended for at
least two months. If the oil dispute is not settled soon,
Syria will be forced to turn to Saudi Arabia, Libya, or
possibly Iraq for help in meeting its oil needs.
Over the longer term, Syria's economic and oil
shortages will be alleviated by the development of the
recently discovered Thayyem oilfield in eastern Syria.
The field is currently producing 12,000 b/d of light
oil and should provide about 60,000 b/d when a new
pipeline is completed around August 1986. Production
at 60,000 to 70,000 b/d would cover half of Syria's oil
imports and relieve some of the pressure the country is
experiencing. Syria must pay its foreign partners for
their share of Thayyem oil, however, so the discovery
will not be an economic panacea.
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Another recent event of potential economic
significance was the installation last July of Dr.
Muhammad al-Imadi, an economic reformer, as
Minister of Economy and Foreign Trade. Imadi is
determined to reform the Syrian economic system,
including revitalizing the private sector. He has
already pushed through changes in Syria's restrictive
foreign exchange and import regulations and has
During the past year, Damascus has continued to
modernize its armed forces, primarily through the
acquisition of new Soviet-designed equipment:
developed afour-year program of reform.
Imadi faces opposition from hardline Bath socialists,
recalcitrant sections of the civilian bureaucracy, and
public-sector managers, all of whom have vested
interests in maintaining the status quo. He appears to
have President Assad's backing, however, and his
actions could eventually cause a dramatic shift in
Syria's economic performance.
In Pursuit of a Strategic Balance
Although President Assad's quest to achieve an Arab-
Israeli strategic balance remains dependent on the
return of Jordan or Egypt to the ranks of the
confrontation states, Syria continues and may even
intensify the buildup and modernization of its own
military forces. Early this year the Defense
Companies-a hodgepodge of regular and special
forces units dedicated to protecting the regime-were
reorganized into a regular armored division and a
special forces division. Although initially under
strength, Damascus assigned the special forces
division to support Syrian military operations in
Lebanon and has begun to flesh out the unit
the Soviets delivered a number of T-72M 1 tanks,
which have much better armor than earlier T-72
models.
the tanks belong to the Republican Guard
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Brigade, which is the primary defender of the Assad
regime.
In addition, Syria contracted with Poland and
Czechoslovakia for the delivery over the next few
years of enough T-72s-possibly T-72Mls-to outfit
two armored divisions.
The prospect of continued close relations with the
Warsaw Pact countries and the expansion of domestic
oil production indicate President Assad will be able to
continue his buildup of Syria's armed forces in the
foreseeable future. 25X1
Assad plans to expand the Republican 25X1
Guards Brigade into a division next year and to
organize a Bath or Republican Guards Corps as a
strategic reserve. He probably regards its
establishment as a way of ensuring the survival of his
minority Alawite regime while increasing the overall
The Israeli withdrawal from Lebanon this year
encouraged Damascus to reduce its regular forces
there and place greater reliance on special forces-
resulting in some savings and an overall increase in
military readiness. Syria reduced the number of
troops in or directly supporting operations in Lebanon
from nearly 60,000 to fewer than 30,000 and has
subsequently concentrated on retraining these units to
restore their combat effectiveness eroded by
prolonged duty in Lebanon. Since July, the Syrians
have used special forces to police Zahlah and enforce
a cease-fire in Tripoli, and, as part of its efforts to
reach an accord with the major Lebanese factions,
Damascus has developed plans to use special forces to
help police greater Beirut.
military threat to Israel.
In the event of a conflict with Israel, Assad probably
would take the strategic offensive by retaking part of
the Golan Heights but would fight as much as
possible on the tactical defensive, which requires
considerably less skill and does not place as great a
premium on having the most modern equipment. In so
doing, Assad probably would mainly use the better
trained and equipped Republican Guards Corps to
counter Israeli breakthroughs.
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Hq~iz al-Assad began his third
seven-year presidential term
President Assad's concern with the security of his
regime that leads him to fill key posts with fellow
Alawites, rigid adherence to Soviet training practices
that do not fully use the capabilities of the equipment,
and the generally lower educational level of Syria's
personnel will continue to hamper the development of
the armed forces. Moreover, the gap between Syrian
and Israeli capabilities is so wide that President Assad
almost certainly will not be able to restore an Arab-
Israeli strategic balance unless Egypt and Jordan
return to the ranks of the confrontation states.
Syria Without Assad: Thinking the Unthinkable
Hafiz al-Assad has provided Syria with 15 years of
political stability. The Syrian people suH'er from his
ruthlessness, but, according to the US Embassy in
Damascus, they respect his strength, particularly
after his successful struggle with the Muslim
Brotherhood in the late 1970s and early 1980s and,
more recently, his deft reestablishment of political
order following his lapse in health and the ensuing
political and military tensions.
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The succession theoretically would be handled by the
Bath Party, but in fact it would be determined by a
consensus among members of Assad's inner circle.
Assad's lieutenants have a common interest in
preserving Alawite domination-although possibly
with a Sunni figurehead-and would attempt to head
off an internecine struggle. Assad's younger brother
Rif at, who is held in contempt by most of the
President's supporters, might attempt another clumsy
power grab like the one during late 1983 and early
1984 that nearly erupted into open warfare. Even if a
transition were successfully managed, longer term
prospects for stability under a successor are slim.
Strong continuity in
Syrian policies, particularly resistance to a peace
initiative, would be likely through the transition. A
weak successor regime might contribute to new
tensions in the region. A new Syrian leader less
tactically adept than Assad and seeking to strengthen
the regime's legitimacy might abandon Assad's
caution on a number of issues, step up anti-US
rhetoric, and even bungle into a renewed conflict with
Israel.
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Lebanon:
Civil War Without End
Lebanon moved closer to political dissolution and
territorial partition during the 10th year of civil war
in 1985. Factional militias continue to battle
throughout most of the country, and initiatives aimed
at political reconciliation have fallen victim to the
endemic violence. Extremists on all sides use
terrorism to discourage moderates from seeking a
common ground. Despite increasing Syrian efforts to
stabilize the country, Lebanon remains a political and
security minefield for US interests.
Political disagreements festered among leaders of
each of the four major Lebanese religious
communities-Christian, Druze, Shia Muslim, and
Sunni Muslim. Each group is determined to maximize
its parochial interests-in terms of power and
security-at the expense of the Lebanese Government
and the national political system. Political loyalties in
Lebanon revolve around family, village, and religious
sect. Most Lebanese feel no allegiance to the central
government, which has become practically irrelevant.
The Lebanese Army units under government
control--the few remaining Christian brigades--
constitute aforce no larger than either the major Shia
or Druze militias. These Army units control only part
of the Green Line, the area around the Presidential
Palace in East Beirut, and a small part of the Alayh
ridge southwest of the Palace. Much of the Lebanese
Army is stationed in areas over which the Lebanese
Government has no control. The 1st Brigade is in the
Bekaa Valley and is directed and supplied by Syria.
The loyalties of most troops of the 2nd Brigade,
stationed in Tripoli, appear divided between Syria and
the local anti-Syrian militias. The 6th Brigade in
West Beirut is loyal only to Shia sectarian leaders.
The Rising Shia Tide
The increasingly militant Shia Muslim community
pressed its challenge to the Lebanese Government and
the Christians in 1985. Shia organizations--both the
The "Green Line" that divides Christian East Monday Morning
and Muslim West Beirut remains a no man's
fundamentalist Hizballah movement and the more
moderate Amal militia--continue to grow in power
and influence in relation to the other major 25X1
confessional groups. They are demanding a greater
political and economic role more commensurate with
their numbers.
Divisions sharpened this year within the Shia
community as the Amal secular reformers and the
Hizballah fundamentalist revolutionaries clashed over
territory and the right to speak for the Shias. Amal
adherents generally seek to alter the existing political
system to accommodate Shia demands, while the
Hizballah radicals advocate the violent overthrow of
the present system and the establishment of an
Iranian-style Islamic republic. The Israeli withdrawal
from most of southern Lebanon last spring sparked an
intense struggle between the two Shia militias.
Amal remains a larger organization, but the
Hizballah network this year grew dramatically in size,
sophistication, and effectiveness as a political party
Secret
NESA NESAR 85-026
6 December 1985
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Druze leader Jumblatt (left)
and Shia Amal chief Barri
(second from left) copier with
Muslim religious leaders in
and as a militia. The Hizballah published its first
political "manifesto" last February and then held a
series of public demonstrations in Shia areas of
Lebanon that attracted large crowds. Hizballah
fighters have almost completely supplanted Amal
militiamen in the Bekaa Valley, operate virtually at
will throughout West Beirut, and are expanding their
foothold in southern Lebanon on avillage-by-village
Syria has moved to stem the Hizballah
fundamentalist tide by bolstering the Amal militia
and preparing it to serve as the primary instrument of
Syrian policy in Lebanon. Syria furnished Amal with
nearly 50 T-55 tanks last summer, began a training
program for several hundred Amal fighters, and
agreed to help reorganize the militia into three
regional brigades
Amal leader Nabih Barri has devoted most of
the militia's resources and manpower to a crackdown
on Palestinian guerrilla activities in Shia areas, which
climaxed in the "war of the camps" in Beirut last
May.
Christians, Sunnis on the Defensive
Most leaders of the Christian community, which
dominates the Lebanese Government and the Army,
Muslim and Syrian demands.
refuse to compromise on Muslim demands for
political and military reforms. Christians, who now
comprise a minority in Lebanon, fear that concessions
to the Muslims would erode the Christian power base
and threaten the security of the Christian heartland
north of Beirut. Hardliners in the Lebanese Forces
militia and the Phalange Party rebelled last spring
against what they saw as the capitulation of some
Christians-including President Gemayel--to
Despite their intransigence, Christian leaders are
slowly coming to grips with the need to deal with
Syria. Key political and militia officials, including the
new Lebanese Forces chief Elie Hubayqa, began
traveling regularly to Damascus this year to negotiate
with the Syrians. Hubayqa then endorsed aSyrian-
sponsored peace plan in November, although it fell
apart within weeks because of opposition within the
Christian and other confessional communities.
Hubayqa and other Christians hope that a show of
submission to Syria will persuade the Syrians to
guarantee Christian prerogatives in Lebanon.
Sunni politicians also sought Syrian assistance in
preserving their traditional position in the political
system. The Sunnis, however, cannot compete with
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Lebanese President Gemayal traveled to
Damascus several times in 1985 to seek
guidance from President Assad.
other confessional groups because they have no
effective militia. Traditional Sunni leaders also felt
increasingly threatened by the growth of a
fundamentalist Sunni movement in Tripoli, Beirut,
and Sidon. This pro-Iranian radical movement is
spearheaded by the Tawhid militia, which spent most
of 1985 battling Syrian-backed militias in Tripoli.
The Druze: Consolidating Gains
Druze leader Walid Jumblatt, head of the Progressive
Socialist Party (PSP) militia, succeeded in
consolidating Druze control over his community's
heartland in the Shuf mountains south of Beirut. The
Israeli withdrawal from the Sidon area last spring
gave Druze militiamen the confidence to move against
the few remaining Christian villages on the periphery
of the emerging Druze "canton" in the Shuf, forcing a
Christian exodus.
The PSP, seeking to become afull-scale Druze
regional army to defend the Shuf, moved to expand its
conventional military capabilities and diversify its
sources of military supplies. The Soviet Union
supplied the PSP with tanks and armored personnel
Christian militia leader Eli
Hubayqa refuses to compromise
carriers via Syria-despite Syrian objections--and
delivered small arms, artillery ammunition, and even
helicopters directly through the new Druze port at
Khaldah for the first time this year,
and fixed-wing aircraft pilots.
Jumblatt, determined to protect Druze gains,
remained as stubborn and uncooperative as ever in
Syrian-backed negotiations aimed at reconciling the
warring Lebanese factions. Jumblatt and various
Lebanese leftist leaders last summer formed a new
political alliance, the National Unity Front, which
was the latest in a series of coalitions opposed to the
Christians. Jumblatt crippled Syrian efforts to broker
an agreement between the factional militias in
October by refusing to deal with Christian leader
Hubayqa
Terrorism and Turf Battles
Lebanon remains a battleground for trigger-happy
militias for whom fighting has become a way of life.
Factional violence erupted at various times of the year
in virtually all parts of the country. Lebanese Army
units and Druze militiamen exchanged fire repeatedly
on the Alayh ridge south of Beirut. Southern Lebanon
witnessed regular fighting between Amal and
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Hizballah gunmen, between Amal and Palestinians,
and between the Israeli-backed Army of South
Lebanon and practically everyone else. Sidon in
particular experienced over a month of heavy street
fighting as Muslim, Palestinian, and Christian
militias struggled for control of the city and its
environs. Pro-Syrian, anti-Syrian, and Palestinian
factions reduced much of the city of Tripoli to rubble
during an extended battle that lasted all year.
Beirut remains a lawless, heavily contested war zone
in which turf battles erupt almost daily. Artillery
duels are common between Christian East and
Muslim West Beirut. During the past year, clashes
occurred between virtually every combination of West
Beirut militias. Clashes sometimes arose from
disputes over which faction controlled which street,
but as often as not they resulted from personal
vendettas or carelessness at militia checkpoints that
sparked wider conflagrations. Athree-day battle
between PSP and Amal militiamen in November
occurred after the Druze tried to remove Lebanese
flags from Amal-held buildings--a miniwar that the
US Embassy described as "futile, even by Lebanese
standards."
Terrorism is a fact of life in Lebanon. Most of the
sectarian factions viewed car bombs, assassinations,
and kidnapings as an acceptable form of warfare in
1985. Targets of major car bombings included the
home of Shia fundamentalist leader Fadlallah in
West Beirut, Druze and Christian militia centers on
both sides of the capital, several Christian-owned
supermarkets and a conference of Christian leaders in
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East Beirut, mosques and churches in Tripoli, and
numerous Israeli and Army of South Lebanon
facilities in the south.
Lebanese terrorism continues to victimize foreigners,
especially Westerners. Extremists kidnaped four more
Americans, four French, and three British citizens in
1985. Sunni fundamentalists seized four Soviet
diplomats to try to force Syria to end its siege of
Tripoli in October. Shia militants hijacked TWA
flight 847 in June, resulting in the death of one
American and atwo-week hostage crisis in Beirut,
where the absence of any central authority enabled
government has had no problem funding this deficit
because Lebanese banks have few local investment
alternatives.
The economic picture remains gloomy, but people
have sufficient food, and considerable money remains
in circulation. The militias continue to obtain overseas
funds, possibly totaling as much as $100 million
during some months. Illegal trade with Syria
increases commercial activity by $50-75 million a
month and provides income. Remittances from
Lebanese abroad still continue, providing $60-90
million a month. Lastly, the illegal and lucrative drug
trade continues unencumbered by Syrian or Lebanese
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the terrorists to operate with impunity.
Hizballah continues
to plan terrorist attacks against US personnel and
facilities.
Bleak Economic Picture
Lebanon's economy remains depressed with little
chance of improvement in the coming year. After 10
years of civil war, the economy is probably operating
at about half of its prewar level. Much of Lebanon's
economic infrastructure has been damaged or
destroyed, many of its most skilled people have
emigrated, and the country is divided into sectarian
zones of influence.
In the last year, inflation has more than doubled to
about 75 percent, the Lebanese pound has depreciated
by over 55 percent, and government debt has grown
by over one-third. On the plus side, the Central Bank
has been able to rebuild its foreign exchange reserves
by refusing to fund the government's foreign
exchange deficit, and agricultural production has
started to recover from the disruptions caused by the
Israeli invasion in 1982.
The government continues to finance much of the
country's economic activity through deficit spending.
It pumps money into the economy by way of its
bloated payroll and a few public works projects even
though government revenues cover less than 15
percent of expenditures. As a result, government debt
has grown from roughly $1.6 billion at the end of
1984 to about $2.3 billion in September. The deficit
this year may total $700-900 million. So far, the
Government interference.
The Lebanese economy cannot recover until the
security situation is brought under control. This,
however, would require a political accommodation
between the contending factions that is unlikely in the
near future. In the meantime, the economy will
function at its presently stagnant level, and the
government will have to continue to resort to
borrowing, eventually generating greater inflation and
further worsening the situation.
Outlook and Implications for the United States
We see no evidence that the Lebanese factions are
prepared to make peace. Fundamental political and
economic problems have worsened during the past
year, and a decade of civil war has generated often
insurmountable personal animosities between
sectarian leaders. Many younger Lebanese who have
come of age during the turmoil of war have no
concept of a Lebanon in which all religious groups live
together peacefully under one government. Despite
the genuine war weariness that pervades much of
society, the ethnocentric civil war mentality remains
strong.
Even if the mainstream religious communities could
find a basis for cooperation, the increasingly
influential Islamic fundamentalists and other
extremists would seek to disrupt any political
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settlement. The fundamentalist movement is likely to
continue to flourish in the anarchical environment of
Lebanon. Despite their relatively small numbers in
relation to other groups, the fundamentalists are
determined and capable of playing a spoiler role in
any Lebanese political reconciliation.
In our judgment, Lebanon will remain in effect a
partitioned country for the coming year. The
Christians and Druze will jealously protect their
respective "cantons" in the mountains north and
south of Beirut. The Shias will consolidate their areas
of control in West Beirut, southern Lebanon, and the
Bekaa Valley. The Lebanese Government will remain
largely powerless, existing in name only. Violence
between factions almost certainly will continue.
Continuing violence and instability in Lebanon affect
US interests because of the potential spillover into
regional politics. Syria remains preoccupied with
enforcing a settlement in Lebanon, and its success or
failure in doing so affects its relationship with Iran,
Israel, and the United States--the other states that
Syrian leaders view as participants in Lebanese
politics. Israel will continue to react vigorously to
threats to its northern border by Lebanese Shia
radicals or Palestinians, and an escalating cycle of
cross-border violence between Israel and Lebanon
would heighten tension in the region.
The self-destructive tendencies of the Lebanese civil
war are likely to cripple US policy initiatives aimed at
reconciling the warring factions. US officials working
in Beirut, moreover, will remain at high risk both
from terrorism and from the random shelling that has
become a fact of life in Beirut.
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Egypt:
The Politics of Austerity
President Mubarak probably looks back on his
government's performance in 1985 with a mixture of
satisfaction and relief. On the positive side, Egypt is
politically stable. Mubarak's pragmatic "safety valve
democracy" has infused the country with a political
resiliency that enabled him to weather a series of
potentially destabilizing challenges. Egypt now boasts
the liveliest political environment in its modern
history with active political parties, an independent
judiciary, and a spirited opposition press.
On the other hand, Mubarak is vulnerable, and recent
events have made him wary of policies that risk
inflaming public opinion against the government.
Witnessing Sadat's assassination at close range has
made him especially sensitive to crises that could
focus popular discontent on his leadership.
Consequently, he has tended to respond to long-term
challenges with stopgap measures. Mubarak has
bought himself time, but he cannot afford to rest on
his laurels in 1986.
The Year That Was
During the past year, Egypt's economy exhibited few
signs of long-term health. The sudden appointment in
early September of a new government headed by a
professional economist indicates that Mubarak feels
acutely vulnerable on this issue. Weak world oil prices
and stagnant or declining revenues from other
traditional foreign exchange earners-including
remittances from workers abroad~ontributed to a
marked deterioration in the balance of payments.
Egypt's foreign payments swung from a modest $200
million surplus in the fiscal year ending 30 June 1984
to an estimated $1.3 billion deficit a year later.
pricing-have included price increases averaging 20
to 30 percent annually. Still, internal prices generally
are substantially below world market levels, and the
reform effort has been too piecemeal and gradual to
significantly affect the economy.
Mubarak's reluctance to impose needed austerity
measures has been deepened by fears of an Islamic
resurgence. Last year saw the rise of an active and
vocal Islamic fundamentalist movement in Egypt.
Since early May, religious figures in Cairo and
elsewhere have been demanding the immediate
adoption of Islamic law (sharia) as the sole basis for
legislation. The depth of popular support for sharia is
difficult to gauge, but the US Embassy reports that
attendance at mosques is up, consumption of alcohol
is down, and more women are wearing the veil. More
importantly, fundamentalists have recently gained
strength in leading universities and student
organizations-traditional breeding grounds for
antiregime discontent.
Thus far, Mubarak believes he has successfully
contained the fundamentalist threat, but his moves
have been largely tactical and the sharia issue is far
from resolved. Mubarak has effectively cracked down
on extremist elements bent on challenging the regime
in the streets, and last summer the government
formally took over supervision of Egypt's mosques to
better control centers of radical Islamic activity. At
the same time Mubarak has attempted to co-opt
Islamic moderates by allowing them access to the
media and by permitting some debate on the sharia
issue in the People's Assembly, where it was quickly
shelved last May. The few minor concessions the
government has made on sharia, however, are unlikely
Effective solutions entail political choices that the
government has been reluctant to make, fearing
widespread civil unrest. Nonetheless, Egypt has
attempted in recent months to address some of the
serious economic distortions caused by its complex
system of subsidies and fixed prices. Policy reforms in
two areas-energy and agricultural procurement
to keep the issue shelved for long.
Recent events have demonstrated that Egypt's
internal stability is also vulnerable to crises outside its
borders. A foreign policy that is hostage to a number
Secret
NESA NESAR 85-026
6 December /985
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of competing interests further limits Mubarak's
ability to restrict domestic fallout. Egypt was severely
jolted by two events last October-the Israeli airstrike
against the PLO headquarters in Tunis and the US
interception of the Achille Lauro hijackers-which
inflamed public opinion against the United States and
Israel and forced Mubarak to choose between
protecting his leadership position and alienating
Egypt's main source of aid.
Mubarak successfully defused antiregime protests by
focusing popular discontent on the United States but
moved quickly to put relations with Washington back
on track once he believed public outrage had cooled.
Beneath his rhetoric, however, Mubarak's sense of
personal humiliation and betrayal appears to have
been genuine.
Looking Ahead: Safety First
The Achille Lauro affair and its aftermath are likely
to cast a long shadow over Egyptian domestic and
foreign policies during the coming year. Given the
array of problems Mubarak faces and the threat they
pose to his leadership, we believe he will focus his
energies on domestic issues-particularly the
economy~espite disruptions caused by the Malta
hijacking and subsequent tensions on the Libyan
border. In particular, he will carefully gauge the
effect on his constituency of any initiative involving
Israel or the United States.
Mubarak has already begun to prepare public opinion
for economic austerity. In ahard-hitting speech at the
opening of the People's Assembly in mid-November,
Mubarak sought to infuse his people with a sense of
national purpose and rally them to the cause of
national development. His heightened sensitivity to
the public mood, however, will severely limit his
ability to impose needed solutions. Mubarak's
greatest fear is that realistic austerity measures would
incite the hard-pressed population to embrace radical
fundamentalism as a weapon against the state.
Despite the large US assistance program-over $1.3
billion in aid during fiscal year 1986-Egypt will be
hard pressed to meet its financial obligations. Most
probably, Cairo will implement fairly rigorous import
restrictions to cut the balance-of-payments deficit. To
maintain subsidies and price supports, these import
cuts are likely to be made at the expense of the private
sector and capital spending-measures that will
probably push economic growth below 5 percent.
With an annual population growth rate of 2.7 percent
and urban growth of 3.5 percent, the Mubarak regime
can ill afford the social and political consequences of a
stagnant economy.
Subsidy reform will come slowly, if at all. Current
plans call for the elimination of most subsidies within
five to seven years, a pace that will yield few dividends
in the near term. Egyptians believe a faster rate of
reform would prove politically suicidal. On the other
hand, Cairo's incremental and excessively cautious
approach to reform offers little incentive for
consumers, producers, and investors to change their
economic behavior.
Islamic fundamentalist activity-including renewed
agitation for the implementation of sharia-will
continue to plague the regime. The movement is
unlikely to threaten Mubarak's rule as long as its
leadership remains politically and philosphically
divided and the government's tacit alliance with the
conservative Muslim Brotherhood against the
extremists holds. The death of aging Brotherhood
leader Talmassani could trigger a realignment of
these forces. Talmassani's most likely successors have
ties to the Brotherhood's more radical paramilitary
wing and might be tempted to make common cause
with the extremists against the government.
Military support for Mubarak is likely to remain
strong over the next year. Rumors persist about
friction between the President and Abu Ghazala, his
highly popular Defense Minister, whose openly pro-
US attitudes have left him vulnerable in the wake of
the Achille Lauro hijacking. Nonetheless, we have
little evidence of antiregime sentiment within the
military despite the affront to Egyptian sovereignty
and national pride inflicted by the US interception of
the hijackers. Although the armed forces are the
ultimate guarantors of Mubarak's tenure, they
traditionally avoid interfering in internal politics. If
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Mubarak were assassinated, however, we would
expect the military to take the lead in approving his
successor and ensuring a smooth transition.
Nonetheless, Mubarak will need to monitor military
attitudes closely. Although complaints about the
economy generally concern bread-and-butter issues
such as pay and housing, a lack of attention to these
grievances would alienate military support for the
regime. Mubarak and his advisers are also known to
be concerned about the growth of Islamic
fundamentalist sentiment within the armed forces
which could be fueled by economic discontent.
Mubarak appears deeply frustrated with the lack of
progress in the search for a broad Middle Eastern
peace. Nonetheless, he will continue to play a
supporting role, while expecting others-Jordan and
the United States-to take the lead. Mubarak is well
aware that with a hardline Israeli Government
expected to take power next October, time is running
out for the moderates on both sides. Ironically, King
Hussein is becoming increasingly skeptical that
Mubarak has any real role to play in the Jordanian-
Palestinian negotiations. Hussein is especially
displeased with the inadequacy of Arafat's recent
renunciation in Cairo of terrorism and with the
publicity accorded Arafat in Egypt.
Mubarak has little choice but to back Arafat, despite
the lingering distrust he feels as a result of the Achille
Lauro affair. Cairo recognizes the need for a central
PLO role in any peace negotiations, and Mubarak
probably believes that close ties will help him put
pressure on the wily PLO chairman to live up to his
recent promises on terrorism. In addition, the
Palestinian cause is highly popular among rank-and-
file Egyptians, including fundamentalists, student
groups, and Mubarak's political opposition. Still,
Mubarak will resist PLO attempts to
strengthen their presence in Egypt.
Prospects for Egypt's formal reentry into the Arab
League appear dim without support from radical
states such as Syria and Libya. Mubarak says Egypt
will fulfill its responsibility on Arab issues without
waiting for the restoration of formal ties and will
insist that those who broke relations in 1979 take the
initiative to restore them. Nonetheless, Cairo has been
disappointed that other moderate Arab states-
notably Iraq-have not followed Jordan's example
and reestablished formal ties.
Implications for the United States
Egypt's need for US economic and military aid will
ensure close relations between Cairo and Washington,
but Mubarak must avoid too close an identification
with US objectives in the region. Moreover, political
realities will compel him to demonstrate that these
relations continue to serve Egyptian interests. As a
result, Washington's leverage in economic reform
matters will be sharply limited. At the same time,
Mubarak will expect increased financial assistance
and debt relief as evidence that the United States is
serious about patching up relations after the Achille
Lauro affair.
The Mubarak government will almost certainly
expand its efforts to obtain greater balance-of-
payments support from the United States next year.
Rescheduling of $3.7 million in military debt
obligations will undoubtedly top the list. Cairo will
also argue strongly for increased conversion of
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economic support funding to cash transfers as a
means of channeling more project assistance directly
into Egyptian hands.
We believe that at current levels of assistance and
with limited economic austerity measures, Cairo
probably will muddle through 1986 without resorting
to a formal IMF rescheduling program. Nonetheless,
rescheduling will almost certainly become
necessary-at the latest by 1987 but possibly
sooner-without major increases in US balance-of-
payments support during the coming year. An IMF-
supervised adjustment program would give opposition
elements a formidable weapon against Mubarak. In
addition, IMF-required subsidy cuts and price
increases would fuel massive discontent within
Egypt's lower and middle classes and confront
Mubarak with an explosive political situation.
If Abu Ghazala is retired or forced out in 1986, the
choice of his successor will be critical to US-Egyptian
military relations. The abrasive and ailing Chief of
Staff, EI Orabi-an ardent and outspoken
nationalist-is not necessarily the leading contender.
promotion
to Defense Minister is improbable and suggest that he
himself may be replaced by the highly regarded Chief
of Operations, Abd al-Halim Salah. Mubarak may
elect to keep Abu Ghazala as Defense Minister long
enough to groom Salah as his eventual successor. In
any event, Mubarak will seek a candidate who is
capable of maintaining a working relationship with
the United States as well as the respect of the
Egyptian officer corps.
In foreign affairs, Cairo will expect Washington to
play a more active and constructive role in the search
for a broader peace. Strains will appear to the extent
that Washington's efforts are viewed as flagging or
not evenhanded. Egyptians do not absolve the Arab
world of responsibility for lack of movement, but they
tend to place primary blame on Israeli intransigence
and-by extension-US support for Tel Aviv.
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Sudan: Facing an
Uncertain Future
The overthrow of President Nimeiri has unleashed
political forces that promise to keep Sudan in flux
over the next year. The senior officers who ousted
Nimeiri have provided weak, inexperienced leadership
through the interim government they created.
Nonetheless, they appear willing to honor their
promise of a transition to civilian rule by next year,
despite the lack of preparedness for elections on all
sides.
We believe there is an almost even chance that
elections and the transition to civilian rule will take
place in 1986. There is an equally strong prospect that
a reconstituted interim regime will hold on to power
until Sudan is prepared to hold elections. Barring
unrest over economic grievances or a costly defeat to
southern rebels, the Army probably would prefer to
see a civilian or another interim regime demonstrate
its inability to run Sudan before moving to take over.
Younger generals and middle-grade officers, who
might lead a coup, probably could provide stronger
leadership to settle the southern insurgency and
impose needed economic reforms.
Khartoum's stability will continue to be severely
strained by internal divisions, both between and
within its civilian and military elements. The south
and the economy will provide the other major
challenges to stability. Khartoum's acquiescence to
labor demands for wage increases and its reluctance
to increase prices are likely to result in higher
inflation and growing shortages that could spark
unrest next year. Meanwhile, the failure of the
dialogue between the government and the southern
rebels ensures the prospect of intensified insurgent
attacks that will severely test the Army's loyalty.
The regime's nonaligned foreign policy, which has
strained US-Sudanese relations, probably will
continue under likely successor governments.
Khartoum will maintain its Libyan connection and
pursue improved ties to the USSR and Ethiopia as a
tactic to reduce support to the insurgents in 1986. The
decline in support for US positions in regional forums
is likely to continue. US-Sudanese military
cooperation will be curtailed, but Khartoum will
continue to count on US military and economic aid.
The Interim Regime's Scorecard
Senior Sudanese officers-spurred by civil unrest, a
general strike over price hikes, and increased
insurgent activity-deposed President Nimeiri last
April, after 16 years in power. The senior command's
seizure of power was motivated largely to preempt a
takeover by younger officers.
The former President's policies, specifically his
imposition of Islamic law and the political division of
the south into three regions in 1983, heightened ethnic
differences, causing growth in the then Libyan- and
Ethiopian-backed southern rebellion that shut down
major oil and water development projects.
Furthermore, already poor economic conditions were
made worse by shortages of food and energy and a
serious drought that contributed to instability.
The Transitional Military Council's promise to return
the country to civilian rule in 1986 underpins its
legitimacy and is a major reason that the regime has
survived despite weak, inexperienced leadership. In
our view, Khartoum is hard pressed to respond
effectively to the conflicting demands from Islamic
northerners and non-Muslim southerners, from the
military and civilian sectors, and from international
creditors and Sudanese domestic economic needs.
Decisionmaking is further confused by the Military
Council's continuing struggle with the civilian
Cabinet. Nevertheless, divisions among opponents
-give the regime a durability it has failed to earn on its
own.
Secret
NESA NESAR 85-026
6 December 1985
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Transitional Military Council
Chairman Abdel Rahman
Mohamed E! Hassan Suwar Ei
The freer political atmosphere in Khartoum and the
regime's nonaligned foreign policy allow opponents to
take advantage of the existing political instability.
Weakened counterintelligence capability-caused by
the abolition of the State Security Organization-
makes Khartoum more vulnerable to internal and
external subversion. Radical groups such as the
Communists, Ba`thists, and Libyan-backed Sudanese
Revolutionary Committees operate openly and receive
foreign support, and some are building their own
militias. Libya is working hard to penetrate Sudanese
society, and an increased number of agents from
radical Arab and Muslim states are operating in
Sudan.
Domestic Political Scene. Preparation for elections
scheduled next spring is a major focus for the regime.
The Military Council reached a consensus on the
interim constitution and an election law only after
long and arduous debate with its civilian counterparts.
More than 30 political parties have declared
themselves since the coup. The regime now must
whittle down their number by passing a political
parties law granting official recognition to run in
elections.
Only a handful of the parties have any following, and
most of these have yet to reestablish the cohesion and
structure lost under the former regime. The political
spectrum of the parties ranges from the far left to the
fundamentalist Muslim Brotherhood. The Ansar
sect's Umma Party, the largest Muslim party,
probably could win a majority if it succeeds in
entering a coalition with its historic rival, the
Prime Minister El Gizouli
Dq/alla~~
Khatmiyyah's Democratic Unionist Party. If the
Ansar and Khatmiyyah parties cannot form a
coalition, elections may be postponed by the Military
Council, particularly since some members of the
council have begun to question the wisdom of holding
elections next spring.
The regime's survival depends on the Army's loyalty.
Several coup attempts and a mutiny of southern
troops in Khartoum failed to overthrow the
government in 1985. The military has become further
politicized, however, and seems more than ever to
reflect the numerous divisions in Sudanese society.
officers and enlisted men are critical of the Military
Council's lack of leadership, its failure to control
civilian opposition activities, and its inability to resist
the pressures of leftist-dominated unions. They also
nurse resentments over slow promotions, poor pay,
and fighting in the south.
Foreign Policy. Khartoum has sought a more
nonaligned foreign policy since the coup, largely to
avoid the perception of being under foreign influence
and as a mechanism to undercut external support to
the insurgents. This policy gives both Libya and the
Soviet Union an opportunity to increase their
influence at the expense of the United States and
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Egypt. Khartoum is likely to value its recent
rapprochement with Libya as long as Tripoli refrains
from direct military support to the insurgents. Libya,
moreover, has won influence in Khartoum by
providing economic and military aid. Khartoum
believes that the Soviet Union can press Ethiopia to
withdraw its crucial support to the rebels. The regime
will continue to seek improved relations with the
USSR and spare parts for old Soviet equipment.
Sudan's relations with Cairo and Washington have
been strained by Khartoum's efforts to pursue a
neutral foreign policy, especially the rapprochement
with Libya. Relations with Cairo have improved in
recent months, but US-Sudanese relations have
further soured. The regime appears to lack the
political will and ability to address US demands to
expel Libyan and PLO terrorists in Khartoum and to
control the anti-US tone in the trial of the former
Sudanese Vice President for his part in the
exfiltration of Ethiopian Jews.
Nevertheless, Khartoum continues to say it values
relations with Washington and views US aid as
crucial. Sudan, however, supports the United States
less frequently on regional issues, and military
cooperation has declined. The regime suspended a
US-Sudanese military exercise in 1985 and is likely to
continue to avoid such conspicuous military
cooperation.
The Economy. Economic conditions remain chaotic
despite an increase in aid since the coup. Stocks of
fuel-with help from Libya-and consumer goods
have been replenished, but famine relief is still
impeded by inadequate transport and bureaucratic
inertia. The war in the south is a financial drain that
absorbs some $500,000 a day. In addition; the
insurgency continues to jeopardize Sudan's long-term
economic future by blocking the development of vital
oil and water resources.
Sudan's financial status remains unsettled. The IMF
has agreed to endorse conditionally Khartoum's
limited economic reform package and not declare
Sudan ineligible for further Fund assistance if arrears
totaling about $200 million are quickly paid.
Prospects for international assistance to repay arrears,
however, are not good. The United States and Saudi
Arabia together have pledged $70 million, but other
donors are noncommittal. Barring unexpectedly large
pledges of aid, the arrearage issue will most likely
remain unresolved, an impediment to larger aid
disbursals by international donors as well as a
constant source of tension between the Sudanese
Government and the IMF.
Khartoum's politically expedient economic policies
are likely to become a source of major instability over
the next year. The government's quick acquiescence
to labor demands for large wage increases and its
reluctance to allow consumer price increases are an
almost certain prescription for higher inflation and
growing shortages in 1986. Moreover, the. failure to
adopt a unified exchange rate or to demonstrate
restraint in budget expenditures sends a negative
signal to the business community, international and
domestic alike, and confirms the suspicion of many
that the interim government cannot, or will not,
implement genuine economic reform.
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The South. Insurgent leaders placed the onus for
initiating dialogue on Khartoum when they made
their first serious overture last fall. They declared a
cease-fire and set conditions for talks, including 25X1
demands for public commitment to a national 25X1
conference regarding the election of a new interim
government by participants in the conference. A
major factor behind the rebel initiative may be
Khartoum's recent resort to acarrot-and-stick policy.
The civilian Cabinet was encouraged to pursue a
dialogue, while the Military Council worked to isolate
and press the rebels by seeking to cut off their
external support and pursuing a military solution.
Resolution of the southern conflict will not be easy
and may not be possible in the next year for any
government in Khartoum, but, in our view, a military 25X1
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elected civilian government. At the heart of a political
settlement will be Khartoum's adoption of a federal
model of government in which the south will receive
constitutional guarantees against the imposition of
Islamic law and formal agreements on revenue
sharing. Meanwhile, internal divisions among
southerners are likely to impede progress on
agreement. If a successful dialogue between the
government and the rebels fails to materialize, the
insurgents probably would receive Ethiopian backing
to intensify their attacks in the south to weaken
Khartoum's resolve.
Political Outlook for 1986 and Implications
Political instability in Sudan makes its future
uncertain, but several outcomes are possible in the
coming year:
? Barring massive civil unrest or a major military
defeat in the south, there is an almost even chance
that the current regime can muddle through to
elections in the spring and a turnover to civilian
rule. There is an equally strong prospect that a
reconstituted interim regime will hold on to power
until Sudan is prepared to hold elections.
? If prolonged civil unrest or a costly defeat in the
south occurs before elections or after elections are
postponed, the prospect increases that younger
generals or middle-grade officers will lead a
successful coup.
continue fighting. All these factors would make a
civilian government or an interim regime vulnerable
to removal by a coup.
A civilian government or another interim regime,
including one headed by Ansar leader Sadiq al-
Mahdi, would continue a nonaligned foreign policy.
Military cooperation with the United States would
further decline, and Nimeiri's offer of military
facilities to the United States might be rescinded.
Such regimes, however, would continue to look to the
United States for economic assistance. The USSR
probably would remain a target of suspicion, but
relations with Libya would remain good.
A takeover by younger generals or middle-grade
officers would be more effective and would have the
greatest popular support if it took place in the midst of
a crisis. A strong military-dominated regime, for
example, might have greater leeway to impose stricter
security and unpopular austerity measures needed to
stabilize the domestic political and economic
situation. Elections and a constitution probably would
be postponed for some time. Ending the insurgency
would be a priority for such a regime, which would
have more flexibility and probably be less dogmatic
than an elected civilian government. Insurgent leaders
probably would have more trust in these officers, as
opposed to some of the more senior officers in the
current regime, especially if they had limited ties to
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? Less likely is a coup by radical or extreme leftist
junior officers with Libyan backing, particularly if
the security situation deteriorates and the more
senior officers fail to take charge.
Extensive divisions among civilians in an elected
government or military-civilian tensions in a new
interim regime are likely to impair the government's
ability to make the necessary hard decisions on
domestic problems. In addition, there is likely to be
little agreement on large portions of the constitution,
including the status of Islamic law. If talks between
Khartoum and the rebels fail to materialize, the
insurgents probably would view any election that took
place as invalid, would find it difficult to reach a
settlement with an ineffective regime, and would
former President Nimeiri.
A new military regime would find the current
nonaligned policy advantageous. It would also
maintain the Libyan rapprochement and pursue
improved ties to the USSR and Ethiopia as a tactic to
reduce support for the rebels and as a source of much-
needed economic and military assistance. Still, a
military regime would be wary of Libyan, Ethiopian,
and Soviet subversion. In addition, it would count on
continued US economic and military support.
Consequently, it would be unlikely to confiscate US
investments and probably would over time renew
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military access rights and exercises, even if these had
been initially suspended to appear more independent
of foreign influence.
The least likely scenario, a coup by junior officers
with a radical or extreme leftist orientation, probably
would require the extensive support of Libyan or
Soviet surrogates to be successful. US interests in
Sudan would be damaged. Cairo would be unlikely to
tolerate such an unfriendly regime in Khartoum for
long. It would seek to develop an internal opposition
that could lead a countercoup and as a last resort
might consider military action.
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Libya:
Qadhafi Under Siege
An unprecedented combination of rising unrest and
foreign challenges coalesced to put Qadhafi at bay in
1985. Four consecutive years of economic decline
prompted growing dissatisfaction with the regime
among the public and key interest groups. Dissident
activity both abroad and in Libya is on the upswing,
and for the first time in two years serious unrest in the
Armed Forces was discovered. Doubts about the
regime's viability have emerged, even among senior
officials, and they are beginning to position
themselves to succeed Qadhafi. Moreover, Qadhafi's
principal adversaries close to home, Egypt and
Algeria, are cooperating to put Libya on the
defensive. Qadhafi has responded to these pressures
by giving greater power to relatives and young
radicals whose programs include domestic repression
and international terrorism. Qadhafi could reduce the
threat to his power by reversing or moderating his
unpopular policies, but he shows no willingness to do
so. In our view, political and economic trends in Libya
continue to run against Qadhafi, and, if, as seems
likely, there is no change in current conditions, his
chances of surviving another year are little better than
even.
The Economic Squeeze
Faltering economic performance and a declining
standard of living continued to erode Qadhafi's public
standing in 1985. Despite Libya's producing about
150,000 b/d of crude oil above its OPEC quota of
990,000 b/d, we estimate that total export earnings
will remain at about $11 billion this year. Severe
austerity measures probably will hold 1985 imports to
$7 billion, which, in conjunction with worker
remittances and other services, will leave a current
account deficit of about $1.2 billion-slightly better
than the $1.5 billion deficit in 1984. Foreign exchange
reserves have dwindled from about $14 billion in 1981
to a current level of $3.5 billion.
including the $11 billion Great Manmade River water
project. Qadhafi also has slowed payments to foreign
companies operating in Libya.
The regime's efforts to cope with economic decline
have placed a growing burden on the local population.
An increasing number of Libyans in Tripoli are
complaining about the unprecedented deterioration in
living conditions,
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Shortages of food, water, and electricity have Z~X1
become a way of life. Long lines at state-run stores
are becoming more common, generating sporadic
disturbances that have resulted in several deaths.
What is available is often expensive: a carton of US
cigarettes, for example, cost $70 last summer.
an emerging consensus among Libyans
change is needed.
Qadhafi probably has aggravated these economic
grievances by his continual exhortations to
revolutionary activity which further undermine the
sense of security Libyans are seeking in their daily
lives.
at the beginning of the year, Libyan officials
confiscated privately owned tractors and construction
equipment, probably to prevent the owners from using
the machinery in private business ventures. In July,
Qadhafi ordered Western musical instruments
destroyed as part of an attack on symbols of foreign
culture. To enforce Qadhafi's dictums against private
land ownership, pro-Qadhafi extremists burned
property records in Tripoli.
Declining income has forced Tripoli to reassess its
development goals. Qadhafi has imposed lengthy
delays on the completion of several showcase projects,
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NESA NESAR 85-026
6 December 1985
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Unrest at I-Iome
Public discontent with the regime has become more
open this year, despite heavy penalties against it.
sabotage
university and secondary school
students have held protest meetings and even sent a
letter to Qadhafi criticizing his internal policies.
Antiregime leaflets and graffiti-some found near
Qadhafi's headquarters at Azziziya Barracks-
appeared in major Libyan cities during the spring and
summer. Qadhafi responded to these protests with
arrests, searches, and, in the case of the students,
Reporting from
'ndicates that a car bomb
exploded in the Tripoli port area in September in
what may have been an attempt to kill Qadhafi. The
most recent anti-Qadhafi incident is last month's
assassination of Col. Hassan Ashqal, commander of
the Central Military District and a relative of
In addition to local opposition, Qadhafi has
encountered growing pressure from Libyan exile
opposition groups, particularly the National Front for
the Salvation of Libya (NFSL). Despite the loss of its
main base in Sudan following the fall of President
Nimeiri, the NFSL has continued its activity with
Egyptian, Iraqi, and Algerian support. In January the
NFSL held its first "National Congress" in two years
in Baghdad, and it now broadcasts propaganda from
radio facilities in Egypt and Iraq.
Libyan authorities believed
dissidents were infiltrating into Libya across the
Algerian border and by sea. Searches and arrests
followed these discoveries.
One of the most ominous developments for Qadhafi
this year is rising discontent in the Armed Forces.
may have been the cause of a fire that destroyed a
warehouse at an airbase near Banghazi.
Troubles Abroad
Foreign affairs presented Qadhafi with mixed results
in 1985. He could point to some successes, the most
important being the rapid expansion of Libyan
influence in Sudan following a coup that brought
down Qadhafi's old nemesis Jaafar Nimeiri. Tripoli
also restored relations with another former enemy,
Somalia, and reopened a People's Bureau (Embassy)
in Niger. But, on the whole, Qadhafi has not enjoyed
the same level of success this year that he did the
previous year when he signed a union with Morocco,
negotiated the French out of Chad at no cost to
himself, and mined the Red Sea with impunity.
Qadhafi was frustrated most of the year in his
attempts to translate his support for foreign regimes
into real influence. In May, relations with Syria
approached the breaking point when Qadhafi could
not dissuade Assad from supporting the Lebanese
Shia Amal militia against the Palestinians in the
"War of the Camps."
Qadhafi was reduced to withdrawing some
of his diplomatic and military personnel from
Damascus in protest. Feelings were so high that
Qadhafi's envoy, Armed Forces Commander in Chief
Abu Bakr Yunis, had a brief fistfight with Syrian
Vice President Khaddam. Last summer, Qadhafi
boycotted an Arab summit meeting convened by his
treaty partner King Hassan of Morocco because
Libyan items were not included in the agenda.
Qadhafi's most serious foreign policy miscalculation,
however, was the expulsion in August of about 30,000
Tunisian and 10,000 Egyptian workers from Libya.
The move was in part an effort to stem the drain on
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foreign exchange caused by workers' remittances.
Qadhafi, in our judgment, also saw an opportunity to
destabilize the already uncertain domestic situation in
Tunisia and to punish Egypt for its ties to the United
States and Israel. Qadhafi probably did not anticipate
the willingness of Algeria and other Arab govern-
ments to come to Tunisia's aid. Most worrisome from
Qadhafi's point of view was significantly closer
cooperation among Tunis, Algiers, Cairo, and
Baghdad.
Qadhafi Circles the Wagons
For the most part, Qadhafi is a judicious political
calculator who is capable of patient waiting. He has
often been able to respond flexibly to his political
troubles, tactically changing course without losing
sight of his long-held revolutionary goals. But when
he is feeling under siege or experiencing a heightened
sensitivity that his revolution is failing, Qadhafi's
usually pragmatic decisionmaking can falter. We
judge that Qadhafi is now in such a strained period,
and Qadhafi's flawed decisionmaking could well
compound his political problems.
In dealing with his rising domestic problems and
increased foreign pressures, Qadhafi has chosen to
repress dissent at home and resist pressure from his
neighbors rather than reverse or moderate his
unpopular policies. Qadhafi's
deepening anxiety over his personal security has
isolated him from the Libyan public and even from
important officials upon whose support he depends. In
our view, this reduces the likelihood that the regime
will address the fundamental problems that threaten
support. This year, for the first time, Qadhafi
celebrated the anniversary of his coup in the relatively
secure city of Sebha. Instead of the usual displays of
military units, he featured parades of Revolutionary
Committee cadre. In our view, this reflects Qadhafi's
distrust of the Army's loyalty and was intended to
demonstrate to his adversaries that the Libyan
revolution would continue even if he were personally
eliminated.
In a narrow tactical sense Qadhafi may have
improved his security. His personnel changes probably
have increased the ability of his supporters to thwart
nascent coup plotting or other antiregime activity. In
our view, however, Qadhafi's increasing reliance on
extremists indicates how deeply eroded his support
has become. In addition, as Qadhafi becomes more
dependent on radicals for support, he risks losing the
loyalty of the armed forces, the one institution
capable of removing him.
Another effect of Qadhafi's siege mentality has been
increased infighting among senior officials as they
prepare themselves for the inevitable succession
jockeying for political position reflects a lack of
confidence in Qadhafi's viability and threatens the
Qadhafi has increasingly surrounded himself with
people whom he believes he can trust-relatives,
fellow tribesmen, or young radicals committed to his
ideology.
professional officials in key positions-
particularly the security services-are being replaced
by young extremists who have come of age under
Qadhafi and are considered ideologically sound.
Qadhafi also has staged rallies in tribal areas-
including the restive Berbers and Magharba tribe-to
convince both internal and external opponents (and
perhaps himself) that he continues to enjoy popular
real or perceived threats to Qadhafi's power are
reaching the highest levels of the regime.
Prospects
Qadhafi's popular base will continue to erode as long
as he responds to the challenges to his regime by
closeting himself with a diminishing circle of loyal
revolutionaries in Azziziya Barracks. Qadhafi is
almost entirely dependent on the continued loyalty
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~~... ~~
and competence of the Revolutionary Committees and
the security services to preserve his position. At
present, these institutions appear capable of
protecting him. Nonetheless, the political and
economic trends in Libya are running against
Qadhafi, and we assess his chances of surviving until
the end of 1986 as little better than even.
A popular revolt against Qadhafi is unlikely, even
with a significant increase in popular discontent. Such
discontent, however, increases the risk of
assassination. In addition, the NFSL almost certainly
will attempt to exploit this discontent, possibly by
launching another commando raid on a Libyan
installation. Qadhafi probably could survive such an
attack, but, if NFSL operatives struck without
suffering substantial losses-by no means a
certainty-it would aggravate his insecurity, diminish
his prestige, and probably attract greater foreign and
internal support for the dissidents.
Grumbling in the military is likely to continue. The
arrests and personnel changes made this year
probably have disrupted coup plotting for at least the
next several months. Nonetheless, we expect to see
more evidence of antiregime activity by dissatisfied
officers over the next year, and a move against
Qadhafi by the armed forces cannot be ruled out. If
the officer corps coordinates a coup attempt with
dissident attacks and/or foreign intervention, we
believe the chances for toppling Qadhafi are better
probably be tested with small-scale probes by
Chadian dissidents rather than an overt Libyan
attempt to seize large swaths of territory.
Domestically, Qadhafi might attempt to purchase
support by reordering economic priorities, delaying
some military purchases, and channeling savings into
the consumer sector. He also might step up oil
production. An increase of 100,000 b/d in oil exports
at current price levels would boost revenues by about
$1 billion annually. Such an increase, however, would
be difficult to sustain under current market conditions
without some price adjustments. Nonetheless, the
likely improvement in revenues would ease mounting
tensions over living standards.
Qadhafi is least likely to reverse his unpopular policies
and curb the power of the Revolutionary Committees
to shore up support for his regime. Such a reversal
would be an admission that his revolution had failed,
and, in our view, Qadhafi will not-and possibly
psychologically cannot-make such an admission.
Moreover, even if he reined in the Revolutionary
Committees, Qadhafi might not be able to count on
greater support among alienated military officers.
Such a move might instead be interpreted as a sign of
than even.
Qadhafi will try to repress dissent and ride out the
storm. At the same time, he may try to recapture
international attention and burnish his prestige
through sudden, bold foreign policy maneuvers. He
almost certainly will continue current efforts to break
up the cooperation against him between Algeria,
Tunisia, and Egypt. Although Libyan relations with
Morocco and Iran appear sound, we cannot rule out a
sudden policy change by Qadhafi to improve relations
with Algiers or Baghdad. Qadhafi, however, probably
will continue his confrontational tactics with Egypt
and may try to strike indirectly at Egypt by
expanding the Libyan presence in Sudan. Renewed
Libyan aggression in Chad may be in the offing,
although French resolve to support N'Djamena would
weakness and encourage coup plotting.
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Morocco:
Growing Challenges
The moderate pro-Western government of King
Hassan II is secure for at least the next year.
Nonetheless, deteriorating economic conditions
coupled with rising expectations among the
burgeoning youthful population are potential sources
of discontent. Of particular concern to Hassan is
pressure from international creditors to tackle his
financial difficulties by reducing consumer subsidies
and other government services. In addition,
restiveness among students, the labor movement, and
Islamic fundamentalists will challenge the political
acumen of the King and may over time destabilize the
regime. Morocco is likely to retain its generally pro-
US policy over the near term. At the same time,
Hassan will look to the United States for economic
and military support.
The Troubled Economy
Morocco's principal problem is the economy, which
cannot meet the needs of the rapidly growing
population. Overly ambitious development spending in
the mid-1970s, the collapse of the world phosphate
market, the drain of the prolonged Western Sahara
conflict, and persistent drought since 1979 have
stifled economic growth. At the same time, near
double-digit inflation is eroding living standards and
reducing the real level of spending on public services.
We estimate that real GDP growth probably will not
exceed 3.5 percent this year. This compares with
World Bank estimates that the urban labor force is
increasing by 6.6 percent annually.
Significant demographic changes are a crucial factor
retarding Morocco's social and economic
development. The burgeoning population of nearly 25
million-more than half of which is under age 20-
has already produced severe strains in health,
education, employment, food, and housing. Moreover,
many of these young people possess few, if any, of the
skills needed for industrial and other technical jobs
and only contribute to urban unemployment, which
already approaches 30 percent. Overcrowding is
particularly acute in Rabat and Casablanca; the latter
was the focus of major food riots in January 1984.
The US Embassy reports that an increasing exodus
from rural areas into overcrowded urban slums has
occurred in the wake of the recent drought. The
overwhelming share of these migrants are the more
productive young farmers. Their departure plus the
drought has boosted food imports to 50 percent of the
domestic demand. Only timely food aid from France
averted a major food shortage earlier this year.
The nation's financial crunch has required Rabat to
request massive additional debt relief. The
government's refusal to guarantee rescheduled debt
payments has resulted in a protracted series of
meetings with foreign lenders and generated
considerable ill will toward Morocco. Moreover,
relations with Paris and London Clubs creditors have
been tarnished by payment delays, which Rabat
claims have been necessitated by unexpected cash
shortages. Failure to cover arrears on US commodity
credits forced the termination of US grain shipments
in 1985, which may contribute to serious food
shortfalls early next year.
In addition to problems with Western governments
and banks, the government has had difficulty coming
to grips with IMF domestic spending targets under a
proposed $315 million standby loan. Rabat is
attempting in large part to avoid major changes in
politically sensitive parts of the budget, according to
the US Embassy. The IMF estimates that trimming
public-sector spending will require additional cuts in
food, fuel, and education subsidies as well as payrolls.
The Fund also is likely to question Rabat's costly
military modernization program to replace rapidly
deteriorating equipment, particularly aircraft, heavy
artillery, and armor. IMF officials will cite
maintenance of existing inventory as a more cost-
effective program. We doubt that Morocco can
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NESA NESAR 85-026
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Morocco: Balance of Payments
Million US $
1981
1982
1983
1984
19858
19868
Merchandasetradebalance
-1,557
-1,773
-1,215
-1,377
-1,035
-1,000
Exports, f.o.b.
2,283
2,042
2,085
2,158
2,085
2,200
Phosphates and derivatives
1,080
874
924
1,000
1,050
1,080
Imports, f.o.b.
3,840
3,815
3,300
3,535
3,120
3,200
Fuel and lubricants
1,200
1,168
984
1,015
720
865
Foodstuffs
789
578
530
657
650
600
Services (net)
-361
-216
155
400
527
749
Receipts from tourism
338
340
372
413
460
500
Worker remittances
963
992
907
625
950
1,050
Interest payments
-634
-740
-805
-926
-700
-600
Private transfers (net)
25
28
26
28
26
28
Current account balance
-1,893
-1,961
-1,034
-949
-482
-223
Capital account balance
1,724
1,949
949
889
919
350
Public debt (net)
1,200
932
385
715
320
380
e Projected (includes debt rescheduling and $400 million oil grant
from Saudi Arabia).
maintain its IMF program, which is necessary to its
financial stabilization plan and its retention of the
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confidence of foreign lenders.
Foreign Policy Concerns
The King has been reluctant to focus on the economy
and continues his longstanding preoccupation with
foreign policy issues. Although the acquisition of
Western Sahara remains a popular cause among
Moroccans, the cost of the war is being questioned by
some and may eventually cause trouble for the King.
Nevertheless, we expect Hassan to persist in his
attempts to acquire the territory and to use the war to
divert popular attention from social and economic
problems. In our view, military morale would be badly
shaken if Rabat sharply reduced defense spending for
Hassan claims the year-old union between Morocco
and Libya is a means to eliminate Tripoli's support for
the Polisario Front, offset Algeria's expanding
regional influence, and ease Morocco's economic
problems. Since the union, Rabat has received about
$150 million in aid from Qadhafi as well as
established a growing, but still small market for
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King Hassan II
of Morocco
King Hassan II, 56, assumed the throne in February
1961. A master ojsubtlety, drama, and pomp,
Hassan II dominates Moroccan IiJe. He is a member
oJthe Alaouite dynasty, which claims descent.from
the Prophet Muhammad and has ruled Morocco
since 1649. Hassan's political behavior, according to
diplomatic observers is
primarily directed toward perpetuating the
monarchy. Since two unsucces~f'ul coup attempts by
members of the armed forces in 1971 and 1972,
Hassan has served as de facto Minister oJDeJense
and assumed direct control of the military as
Supreme Commander and ChieJof the General StctfJ`:
Moroccan agricultural exports and jobs for Moroccan
workers-8,000 jobs have already been provided. At a
minimum the union has bought some time for the
government by raising popular expectations about
financial aid. The assistance, however, is not likely to
be sufficient to head off Morocco's domestic
difficulties
Complaints From Key Groups
Students. We believe the regime is incapable of
satisfying the economic expectations of youth, and
this is a major source of concern to the government.
Students are better educated than their parents and
view the monarchy with less awe than their elders.
Spending cuts have forced reductions in the number
of pupils admitted to secondary and university
programs-widely viewed as the key to well-paying
jobs. Makeshift vocational training programs are an
unpopular substitute because most youths want a
general education and believe they have the right to it.
Moreover, university graduates expect the
government to provide them with jobs if they cannot
find suitable employment themselves. We believe that
students and unemployed youths will be increasingly
willing to express their grievances through violence.
An additional worry for Hassan is that Moroccans
traditionally place great importance on education and
that raising tuition or other fees to help finance
education could be the catalyst for demonstrations.
Islamic Fundamentalists. According to the US
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the urban professionals have increasingly turned to 25X1
Islamic fundamentalism as a means of expressing
discontent with the regime. We believe the willingness
of fundamentalist leaders to target Hassan's
mishandling of social and economic problems
ultimately may erode the King's status as defender of
the Islamic faith-a key element in his claim to
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for example, fundamentalists helped foment unrest by
distributing tracts attacking the King's economic
mismanagement. More recently, Hassan's decision to
enlarge the Royal Palace by demolishing adjacent
neighborhoods in Casablanca set off demonstrations.
Incidents of this sort reinforce the complaint of the
more radical militants that the King is not a good
Muslim and is indifferent to the deteriorating
economic plight of his fellow countrymen.
Organized Labor. Organized labor is a weak element
in Morocco's political system. Although labor's rank
and file is restive over poor economic conditions,
senior leaders of major unions, who have been co-
opted by the regime, are reluctant to press for
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significant reforms. Nevertheless, growing
unemployment and a declining standard of living, in
our view, would allow union militants to gain
increased influence in formulating union policies,
including strikes and other antigovernment activities.
Military and Security Forces. We expect that Hassan
will have to rely more heavily on his fairly effective
security and military forces to suppress discontent.
We believe that Hassan is aware of the problems that
confront him and Morocco, but that he lacks the
expertise to deal with complex economic and social
issues. Morocco's armed forces appear loyal, but some
dissatisfaction exists among younger officers over the
poor quality of senior leaders. In addition,
are
concerned about basic problems such as low pay and
poor housing. In our view, economic problems slowing
the flow of materiel or reducing living standards, or
political or military setbacks in the Western Sahara
war, could weaken support for Hassan among the
military and security forces. In such circumstances we
believe that the possibility of a coup attempt, such as
occurred in the early 1970s, cannot be ruled out.
Outlook
We believe Hassan's principal challenge for the
foreseeable future will be coping with his country's
financial crisis. Only a major surge in world
phosphate prices will spare him continued slow
economic growth and a large pool of urban
unemployed. The IMF estimates that in 1986
Morocco's debt service ratio will reach 38 percent,
even with the recent rescheduling agreements.
Additional debt rescheduling will be required for the
next several years. We believe lenders will take an
increasingly tough stand in assessing Morocco's
creditworthiness. Additional closings of credit lines
will reduce Rabat's ability to provide essential
consumer goods-including foodstuffs-on a timely
basis.
Foreign assistance from traditional sources will
remain tight. France has turned down Moroccan
requests for new military purchases until Rabat clears
up large arrears and probably will not be willing to
repeat last summer's provision of emergency grain
shipments. Even Rabat's traditional Arab backers,
such as Saudi Arabia, will be unlikely to provide more
than emergency assistance because of their own
financial pinch resulting from declining oil prices.
Continued economic and financial problems, coupled
with overpopulation and the rising expectations of
youth, provide conditions conducive to more frequent
outbursts of popular discontent. Rising prices and cuts
in social services, especially in education, are potential
flashpoints for demonstrations.
We believe that radical Islamic fundamentalists,
exploited by Iran and others, will use every
opportunity to criticize the King's ostentatious
lifestyle and blame the United States for the country's
ills. These issues will have particular appeal among
the poor, who will be under increasing pressure to
make ends meet.
The King's style of rule is based on the manipulation
of competing interest groups through divide-and-rule
tactics. Although we believe these skills will help, we
expect him to have to rely more heavily on the
country's security and military forces to suppress
popular outbursts as he did during the food price riots
in January 1984.
Despite strains in relations with the United States
over his union with Libya, Hassan wants to retain
close ties to Washington. At the same time, the union
provides economic benefits to Rabat in addition to
keeping Libyan military aid from the Polisario Front.
As long as Hassan believes that Morocco is gaining
from the Libyan connection, he will resist pressure
from Washington to abrogate the compact. Moreover,
he believes that the United States needs Morocco for
strategic reasons and that US use of Moroccan
military facilities entitles Rabat to economic and
military aid far above current levels. If US assistance
does not meet Rabat's expectations or becomes a
focus of concern among dissatisfied elements-
including the military-Hassan might bring the
Soviets in, as he did during the 1960s.
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Algeria: Bendjedid Politics
Take Hold
At mid-decade all indications are that President
Chadli Bendjedid, who assumed his post in 1979, is
consolidating his position and continuing to put his
mark on the country. The focus of politics in 1985 has
been aBendjedid-initiated debate on the
"enrichment" of the National Charter, a document
promulgated by former President Boumedienne in
1976, which sets forth the country's socialist ideology
modeled on Soviet lines. Reconsideration of the
Charter, which may be concluded by the end of
December, appears to be part of the government's
efforts to adopt a less dogmatic brand of socialism
mainly through a shift toward private initiative in the
marketplace and decentralization of the government
bureaucracy.
Bendjedid's orientation strikes a responsive chord in a
population that is weary of economic austerity and
inefficient public administration is ready for
comprehensive change. It is unlikely, however, that
the debate or its results will spark much optimism
among the public. Reforms espoused by the
government-although headed in the right
direction-represent little more than tinkering with
the economic and political system. Dim economic
prospects and demographic pressures demand more
concerted action by Algerian leaders, especially
because they can no longer rely on rising petroleum-
generated revenues to fund rapid development.
National Charter: Institutionalizing "Bendjedidism"
In our view, Bendjedid's decision to revise the
National Charter stems from the same political
motivation that led Boumedienne to adopt the
Charter: to formalize his own version of the country's
ideology. Boumedienne could institute Soviet-style
socialism in Algeria only after a 10-year battle with
conservative opponents and other rivals, who were
finally overcome in the mid-1970s. Bendjedid's
attempt to revise the Charter signals his success in
pushing aside Boumedienne's leftist stalwarts and
replacing them with military officers and technocrats
who share his pragmatic political and economic
For the most part, the current debate and its results
are preordained. Most observers believe the findings
will reflect government policy. According to the US
Embassy, the debate has been closely supervised by
the ruling National Liberation Party (FLN), the only
legal party, as it progressed from the local to the
national level. FLN commissions tasked with
supervising the debate restricted discussions to three
areas-state institutions, economic development, and
political ideology-while skirting more controversial
issues such as Islam or the role of the military.
Bendjedid, at the initiation of the debate at the 14th
FLN Central Committee meeting last spring,
promised a national referendum on the revised
National Charter. The vote could take place by the
end of the year following the FLN Congress in mid-
December. Alternatively, Bendjedid may have the
revised Charter ratified by the FLN, because he
specified that a referendum would not be necessary if
few changes were made.
Despite the formality of the debate, it symbolizes the
profound changes taking place in Algeria. The
government, in the face of public disgruntlement with
Soviet-style socialism, is groping to institute reforms,
largely along Western lines, to cope with a major
population surge, falling hydrocarbon revenues, and
low agricultural productivity. Bendjedid also hopes to
modernize military, educational, and governmental
organizations. At the same time, Bendjedid and his
colleagues do not want to abandon the revolutionary
heritage that has marked Algeria from independence.
The Economy: An Opening Toward Capitalism
At the heart of Bendjedid's espousal of a larger role
for private enterprise is the apparent failure of
centralized planning to promote economic
development and satisfy consumer demand. Although
orientation.
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Algeria has the strongest economy in the region and a
reputation for careful financial management, we
believe Bendjedid realizes the country no longer has
the financial resources to squander on economically
questionable heavy industrial projects at the expense
of other economic sectors, especially agriculture. Oil
and gas exports, the mainstays of the economy, show
little growth in terms of value. In addition, the
country is becoming more dependent upon food
imports, in part because of a burgeoning 3-percent
annual growth in population and almost no growth in
domestic food production. Algeria also must
renegotiate gas contracts with its key West European
customers next year. Downward pressure on gas
prices and the availability in Western Europe of
Soviet gas from the trans-European pipeline will make
it difficult for Al iers to maintain above-market
prices for its gas~~
The government hopes to encourage private initiative
primarily in agriculture and in nonstrategic light
industries and services. Algeria's current five-year
development plan is geared toward agriculture and
the offer of free state lands to farmers. Private-sector
farms already account for the bulk of the country's
cereal and meat production. Officials hope to
implement Western management techniques in the
state sector and allow entrepreneurs greater freedom
of action.
The benefits of these economic reforms probably will
be long in coming, however, as long as the government
controls the principal sources of economic activity.
For example, there are no indications that Bendjedid
will reduce redundant manpower in state-owned
factories, despite the implementation of more rational
management programs. The government also seems
inclined to retain control over the selection of crops
and the marketing mechanism for all farms.
Businessmen will be prohibited from investing in
heavy industry, in the all-important petroleum sector,
and in the manufacture of consumer goods.
The Military: From Revolutionary to
Professional Corps
In a less visible manner, the government is embarking
on a program to transform into professional armed
services a military still embued with the ethics of
guerrilla warfare. Algiers has adopted two courses to
achieve this goal: diversification of its military
equipment, and reorganization of the Ministry of
Defense and the officer corps.
Within a year of signing its last major arms contract
with the Soviet Union in 1980, Algiers approached
major Western arms manufacturers including the
United States, Great Britain, France, and West
Germany to solicit bids on a variety of new military
projects. Since then, the Bendjedid government has
asked Western suppliers to coproduce various
armaments in Algeria as another means of breaking
the country's dependence on Moscow. Weapons
diversification will be atime-consuming process, given
the country's restricted finances and continuing need
for close ties to the Soviets to assure access to spare
parts.
More progress is likely in reorganizing the Armed
Forces. Late last year, President Bendjedid promoted
eight colonels to general officer rank, reinstated the
office of chief of staff, and appointed a new senior
military adviser. The government approved a second
round of senior officer promotions in July, while
creating new directorates and reorganizing existing
ones. Still unclear is how the reorganization will
affect lower level tactical units in terms of their
training and fighting doctrine.
The psychological implications of these decisions on
the military hierarchy and public will be far reaching.
Never before has the military had generals.
Moreover, there are no separate armies for generals to
command. Finally, four of the six new generals were
given jobs related to intelligence and internal military
security. These changes will allow for more efficient
management as well as closer supervision of the newly
redesignated Air Force, Navy, and air defense
commands. The creation of general officers also will
provide greater headroom. Lack of promotion
opportunities has been a longstanding complaint
among junior officers. At the same time, there is some
skepticism in the military and among the public over
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the need for general officers, and some view such
positions as nothing more than high-paying jobs for
Bendjedid's cronies.
Foreign Policy: Putting National
Interests Above Idealism
Parallel with the government's attempts to adopt
Western practices in economic and bureaucratic
management is its shift toward closer relations with
Western nations. Another theme is Algeria's
concentration on regional politics and issues that
touch directly on national interests, rather than on
more visionary international issues such as the
Algerian-sponsored "new economic order" and
North-South economic dialogue of previous years.
Even though the majority of Algeria's diplomatic
contacts are-and probably will continue to be-with
Communist and Third World radical states, relations
with Western states are increasingly important to
Algiers. Algeria needs Western markets for its
natural gas exports and wants access to Western
capital, food, and military hardware.
In 1985, Algeria began to shift its attention from
Morocco, the country's traditional adversary, to Libya
as a threat to national security. We believe that
Algerian leaders now view Libya as a menace at least
as dangerous as Morocco. The manifestations of this
concern are Algeria's steady shift of military forces
eastward, its budding economic and military
cooperation with Tunisia, its willingness to patch up
differences with Egypt, and its collaboration with
both Tunis and Cairo on ways to undermine Libya's
influence in Arab and regional politics.
Algeria's relations with Morocco have deteriorated
since Rabat's "union" with Libya in August 1984.
Earlier this year, Bendjedid presented King Hassan
with a plan that would allow the Western Sahara to
be linked to Morocco much like the relationship
between the United Kingdom and the Commonwealth
nations. Relations between Algiers and Rabat in the
past year have been marked by the destruction of a
Moroccan reconnaissance aircraft by Polisario
guerrillas with an Algerian-provided missile,
Morocco's capture of Islamic dissidents based in
Algeria, and another Moroccan-Algerian stalemate in
the United Nations over measures to end the conflict
Other elements of Algeria's diplomacy have followed
patterns established in recent years. Algeria continues
to keep the radical Arab "rejectionist" states at arm's
length, while probing for ways to bridge the
differences between radical and moderate Arab
states. Algeria's activist diplomacy in Sub-Saharan
Africa appears designed to blunt Moroccan diplomacy
and Libyan machinations. Relations with France
remain strained in large part because of what Algiers
views to be Paris's inclination to appease Qadhafi and
side with Morocco in the region.
Domestic Crosscurrents
Bendjedid's efforts to change course have not been
without cost. Programs to modernize the country
through the promotion of Western managerial
techniques and a modest degree of local initiative on
the administrative level have produced some tensions
within the government.
the modification of the
National Charter is being resisted by leftist stalwarts
in the FLN, who fear that liberalization will
undermine the regime. Such opposition does not
present an immediate danger to Bendjedid, given his
firm control over the government apparatus.
Nevertheless, differences could become more intense
and widespread if the government's liberalization of
society encourages open dissent or the economy does
not rebound.
Some of these pressures may be coming to the surface
in the guise of ethnic and religious dissidence. Both
the Berbers, anon-Arab ethnic group that comprises
about 25 percent of the population, and Islamic
fundamentalists have been increasingly active during
the past year. Recently, for example, Berber activists
clashed with police in Tizi Ouzou-the Berber capital
100 kilometers east of Algiers-following the
conviction of a popular Berber singer for antiregime
activities associated with the alleged Berber-
dominated "Algerian League for Human Rights." A
widely publicized raid by putative Islamic
fundamentalists on a police armory last summer was
the boldest action to date by religious dissidents.
Government concern about the threat from this
quarter was reflected in the pervasive security
roadblocks around the capital during the late summer
in the Western Sahara.
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and fall and a massive two-month dragnet by security
forces that netted 17 fundamentalists. In October
gendarmes used helicopters and armor to quash one of
the more dangerous groups based in Larba, 40
kilometers south of Algiers.
Prospects for 1986
In our view, the Bendjedid government does not face a
serious threat either from ethnic or religious
dissidents or from other opposition groups. Berber
activists are better organized than the
fundamentalists and probably more numerous. Their
demands, however, are principally social, particularly
the protection of the Berber language, rather than
political. The fundamentalists hope to foment a
popular revolution, but they are fragmented.
While the Bendjedid government is not in immediate
danger, we believe it will face more open challenges as
it attempts to move the country away from the
revolutionary legacy of previous leaders. Most
Algerians did not witness the revolution or experience
the early years of nation building, and they are less
inclined to make sacrifices for the sake of socialism
and national development. Both the Berber and
Islamic activists seem less inhibited in confronting the
government, and both groups appear to have enough
support to sustain their activities. Tough security
measures alone will prove ineffective in quashing
dissent from these quarters, in our judgment. At the
same time, Bendjedid probably will attempt to find
ways to co-opt or accommodate dissidents without
relinquishing any of his prerogatives.
Algeria's economic fortunes will be tied to world oil
and gas markets for the foreseeable future, despite
Bendjedid's efforts to restructure the economy. We do
not expect a significant decline in the demand or
prices for Algeria's hydrocarbon exports next year-
which probably will allow Algiers sufficient financial
leeway to move ahead with essential development
plans. A marked deterioration in the oil or gas
markets, however, would severely hinder government
plans to redress social needs and implement economic
reforms. For example, the government loses $340
million annually in export receipts for each $1 decline
in oil prices at current production levels. Moreover,
every 100,000-barrels-per-day drop in hydrocarbon
exports costs the regime almost $1 billion at present
price levels.
In its foreign policy, the Bendjedid government
probably will unveil few surprises next year. Algiers
will continue its hardline stance toward Morocco and
Libya and its balanced position between the radical
and moderate groups of Arab states. Relations with
Western Europe show promise, but they will hinge to
some extent on developments in trade talks over gas
pricing. Algerian relations with the USSR and its
allies probably will continue to mark time because of
Algeria's more important regional concerns and
interest in expanding trade contacts with the West.
The possible exceptions to continuity are further
rapprochement with Egypt and possibly Libya,
especially if Algiers detected a loosening of the
Moroccan-Libyan political union. Renewal of formal
ties to Cairo, however, probably will come only after
other Arab states have done so.
Algiers will remain keenly interested in further trade
and political openings toward Washington. Most key
Algerian officials appear committed to securing US
technology and expertise to revitalize the country's
industrial plants and military establishment. Common
trade interests aside, political relations probably will
develop more slowly, given the divergence in political
viewpoints in both capitals on Middle Eastern issues.
Algiers probably will want to move carefully in
developing bilateral ties on the political level because
of what it views to be Washington's continuing
military and diplomatic support for Morocco, as well
as Algeria's own interests in maintaining ties to
radical Arab states.
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Tunisia: Foreign Crises and
Political Immobilism
This year has been one of unprecedented challenges
for the moderate pro-Western government of
President Habib Bourguiba and Prime Minister
Mohamed Mzali. Libya's expulsion of about 30,000
Tunisian workers beginning last summer, and the
resulting threat of military conflict, were followed by
the surprise Israeli airstrike on PLO facilities in
Tunisia. More recently, the government clashed with
the principal labor union-the largest organization in
the country~ver wages. These challenges revealed
the weaknesses of the regime and its inability to come
to grips with festering social and economic problems.
In our view, political maneuvering in anticipation of
Bourguiba's death will sharply limit the government's
ability to move quickly and decisively in the coming
year.
A State Adrift
At yearend, the traditional mainstays of Tunisia's
foreign policy are badly eroded. France and to a lesser
extent the United States, the principal allies of
Tunisia since independence, have been found wanting,
according to Tunisian leaders. In their eyes, both
countries have been reluctant to respond to urgent
requests for military assistance to deter military
threats from Libya. The Israeli airstrike, which
produced a consensus that the United States was at
least negligent in not warning or protecting Tunis,
compounded these misgivings. Although Tunis
undoubtedly will want to strengthen its ties to
Washington and Paris, it will do so with less
confidence that its Western partners are committed to
helping Tunisia deal with foreign subversion or
aggression.
To compensate for French and US dilatoriness,
Tunisia has sought military and political support from
Iraq and Egypt. Its major diplomatic effort, however,
has been in courting Algeria. Tunisia has undertaken
an unprecedented expansion of military and economic
cooperation with that country. Algerian leaders, for
their part, have been eager to accommodate Tunis,
given their own concerns about Libya and
longstanding pretensions to regional leadership.
This courtship, however, has not been completely
palatable for Tunisians. Government leaders and
much of the public share misgivings about Algerian
motives and intentions. Most officials probably
believe that the United States and France would come
to the country's support solely out of concern for
stability in North Africa and to check the advance of
Libya. Algeria's motives, however, are perceived
differently. As the most powerful country in the
region and a neighbor with a radically different
ideology, Algeria is suspected by Tunisians of having
political and even territorial designs on their country.
Mutiny in the Body Politic
Libya's expulsion of Tunisian workers and its blatant
attempts to undermine the government through press
attacks and letter bombs have not been sufficiently
threatening to quell public discontent with the
government and curtail infighting between political
groups and individuals. Prime Minister Mzali, who
appears to have taken advantage of Bourguiba's
declining faculties to strengthen his own position, has,
however, attempted to exploit Libyan machinations to
undermine opponents. His principal target is Habib
Achour, leader of the politically powerful, 350,000-
member General Union of Tunisian Workers
(UGTT). Achour during the past year called on Mzali
to end the wage freeze and link wages to inflation. To
back up his demand, Achour threatened nationwide
strikes to paralyze the government.
The relaxation of tensions between Tunisia and Libya
in late October allowed Mzali to launch afull-scale
attack on Achour. Probably aware of infighting
between Achour and other UGTT executives who
support a softer line toward the government, Mzali
initiated an intense press campaign against Achour,
accusing him of mismanagement. Mzali followed up
with harsher action, using police units and union
militants associated with the ruling Destourian
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Socialist Party (PSD) to raid UGTT offices. About
450 union leaders were temporarily detained, and
Achour was placed under house arrest. UGTT
members supporting Achour staged several strikes in
response and, in some instances, clashed with police.
Following atwo-week interlude, Mzali renewed his
offensive against the UGTT leadership. The most
ominous move was a government proposal for an
extraordinary UGTT congress to remove Achour's
associates, who control the national headquarters of
the UGTT. Any attempt to further weaken Achour
could unify the opposition and prompt more
widespread violence. Opposition parties, which had
been discreet in their support for the UGTT
leadership, are openly supporting Achour.
At this juncture, Mzali has won a fragile victory over
the UGTT. Progovernment workers have gained
control over most UGTT offices, and most of the
strikes called by Achour supporters have failed
because of the threat of government sanctions. The
reconstituted leadership of the UGTT appears
sufficiently cowed to refrain from leading
antigovernment actions. Mzali also has been able to
avoid the serious economic-related disturbances that
rocked the country early last year, when Tunisians
rioted following the announcement of a 100-percent
rise in the price of bread.
In its geographic dimensions, the government-UGTT
clash reveals a clear distinction in regional support for
each side. The first UGTT locals to openly criticize
Achour's leadership last summer were located in
President Bourguiba's home base in the northern town
of Monastir and in other cities of the Sahel. UGTT
branches in the southern cities of Gabes, Gafsa, and
Sfax resisted the takeover of union offices by the
PSD-controlled militia. These affiliates also have
been able to organize successful strikes. Government
control over southern Tunisia traditionally has been
weak, given the concentration of political power in
clans from the north and ethnic ties of southern
Tunisians to tribes in Libya.
At the senior levels of the government, longstanding
infighting within the political elite over Bourguiba's
mantle appears to have abated because of the
imperative for unity. We believe, however, that
political maneuvering will continue and that Mzali's
ability to hold onto power is not assured. He is
unpopular because of his strong support for increased
bread prices that prompted last year's riots.
Influential rivals such as Minister of Public Works
Sayah, Foreign Minister Caid Essebsi, or Bourguiba's
son Habib and wife Wassila pose a threat as long as
Bourguiba lives. Nevertheless, Mzali has adroitly
used the country's crises to strengthen his position as
Bourguiba's designated successor.
The military, traditionally apolitical, is increasingly
concerned about the government's ability to restore
the country's economic health. Younger officers also
are inclining toward Islam and nonalignment as an
alternative to the current socialist, Western-oriented
political and economic structures. Mzali has
attempted to improve his popular standing among the
military's lower ranks, but we doubt that he can rely
on military support in the event of widespread
antigovernment demonstrations.
Economic Shoals
Internal disorder and foreign policy problems have
distracted the government from the country's
economic difficulties. At the heart of Tunisia's poor
financial outlook are dwindling petroleum resources,
which will make the country a net importer by the
next decade, and reduced prices in the international
market for phosphates, long a key export commodity.
These shortcomings are compounded by high
population growth, dismal performance in the
agricultural sector, and a drop in remittances from
workers in Western Europe and Libya.
A recent study of the Tunisian economy by the World
Bank outlined the more obvious manifestations of the
country's financial decline. These include a near
doubling of the current account deficit and debt
service ratio between 1981 and 1984, a steady
widening of the balance-of-payments deficit, a 4-
percent-per-year increase in the labor force despite a
persistent 20-percent unemployment rate, and foreign
exchange reserves covering only two or three weeks of
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imports. The Bank's proposed remedies involve
politically risky initiatives in both government
spending and allocation of foreign exchange:
? Devaluing the Tunisian dinar in 1986 by 15 to 20
percent.
? Reducing price controls and subsidies (the latter by
2.5 percent per year).
? Limiting wage increases to 2 percent per year in the
public sector.
? Instituting a progressive cut in the budget deficit
from the current level of about 10 percent of GDP
to 1.6 percent by 1991 through lower expenditures
instead of through a tax increase.
Government leaders claim to recognize the need for
action. Tunis's willingness to let the value of the dinar
depreciate against major West European currencies
during the past six weeks is a step in the right
direction. The commitment to major reductions in
government spending, however, is likely to be far
more tenuous because of the impact on prices of
subsidized consumer goods and on already
uncomfortably high unemployment. The World Bank,
nonetheless, believes-and we agree-that Tunis has
little time left to avert a financial crisis and a loss of
needed foreign credits. The Bank projects the crunch
could come as soon as 1988.
Forecast: Stormy Seas Ahead
Tunisia's troubles almost certainly will persist beyond
1986, even with Bourguiba on the scene. Tunis cannot
be assured that the UGTT will remain passive, despite
its emasculation. Reports from the Embassy that the
government may propose another year of wage freezes
could spark a fresh round of demonstrations and
violence, especially if officials simultaneously reduce
subsidies for bread or other basic commodities. In any
event, the ruling PSD will remain tied to Bourguiba's
socialist policies and increasingly concerned with its
own survival. This inaction will only benefit
government opposition groups. For example, all
indications are that Islamic fundamentalists are
enjoying a resurgence throughout Tunisian society,
especially among youths who perceive the current
regime as out of touch with popular concerns.
Internal strains also will encourage unwanted foreign
meddling. Libyan leader Qadhafi almost certainly
hoped that his unceremonious dumping of Tunisian
workers would both unsettle the Bourguiba regime
and provide an opportunity to introduce agents of
influence. He could at any time decide to repatriate
additional Tunisian workers, back a commando
operation by Tunisian dissidents, or launch terrorist
operations against Tunisia. Press and Embassy
reports during the past year cite arrests of foreign
agents associated with Iraq and Syria. In our view,
Algerian assistance, although potentially helpful in
preempting political or military action in Tunisia by
other Arab states, could be used to influence future
Tunisian leaders.
Tunis probably will continue to explore further
military and economic cooperation with Algeria and
friendly Arab neighbors. The government, however,
will stop short of permitting a sizable Algerian
military presence unless it perceives an imminent
threat from Libya. The Tunisians could attempt to
secure weapons from Italy or West Germany if
France continues to procrastinate in supplying
military aid. Tunis may also expand contacts with the
Soviet Union and discuss weapons purchases, if only
to gain leverage to extract greater security assistance
from France and the United States.
Mzali's ability to appear as a decisive leader will be a
key to Tunisia's internal stability in the near term.
Bourguiba's declining faculties will provide further
opportunities for the Prime Minister to place his mark
on the bureaucracy and policies of the country.
Nevertheless, Mzali cannot be assured of complete
freedom of action until Bourguiba's death. He also
will have to contend with powerful opponents within
the political elite, who almost certainly will intensify
their efforts to discredit Mzali as Bourguiba's demise
becomes imminent. We believe that Mzali will
continue to take tough action against real or imagined
opponents. There is little evidence that he will ever
fulfill earlier promises to allow greater political
participation by opposition movements. In our
judgment, he is more likely to move firmly to protect
the regime, even if harsh measures tarnish the
country's record as a relatively moderate and tolerant
Arab state in terms of its domestic politics.
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Bourguiba's death during the next year would be a
catalyst for more instability in Tunisia. Mzali is
Bourguiba's successor under the constitution, but he
would immediately face challenges from leading
political figures within the government and from
opposition groups during elections scheduled for late
1986. Under these circumstances, the chances of
military intervention, either in cooperation with Mzali
or against him, would increase dramatically.
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Mauritania: Taya
Under Fire
After 11 months in office, Mauritania's President
Taya appears weak and vacillating in tackling his
country's severe economic and political problems.
Nouakchott's limited resource base has been further
weakened by drought, corruption, and managerial
ineptitude. The government depends on foreign
largess for survival. Taya's ability to cope with these
issues is complicated by external pressures to take
sides on the Western Sahara dispute. He cites his
predecessor's pro-Algerian stance as instrumental in
last December's coup. Taya knows he must avoid
being sucked into the fray because of the risks of
reopening the ethnic split between Arab officers and
black Africans-who dominate the military's enlisted
ranks and have previously refused to fight against the
Polisario.
During the next year, Taya will be under increased
pressure to take a more active role in managing the
economy. This will be a formidable task, as there are
no prospects for a dramatic turnaround in iron ore
and fish prices, Nouakchott's principal sources of
revenue. Diversion from this task by foreign policy
concerns will only complicate Taya's already daunting
problems in getting Mauritania back on its feet.
A New Start
When Chief of Staff of the Armed Forces Maaouiya
Ould Sid Ahmed Taya replaced Mohamed Khouna
Ould Haidalla in a bloodless coup last December, he
pledged to end corruption and economic
mismanagement and to deal with the effects of the
drought. In a recent speech, Taya catalogued his
predecessor's faults but offered almost no evidence
that his regime was coping with the country's
problems.
Taya's government is composed primarily of Haidalla
holdovers and new individuals with no demonstrated
competence. Contrary to initial pledges to improve
government efficiency, Taya has not abolished the
state-run companies or curbed official corruption.
Refugee camps continue to grow-Mauritania has
President Maaouiya
Ould Sid Ahmed
Taya of Mauritania
Maaouiya Taya was named President following the
ouster of Mohamed Ould Haidalla. He had earlier
served as Prime Minister and Minister of Defense
from April 1981 until March 1984, when Haidalla
removed him in a dispute over recognizing the
Saharan Arab Democratic Republic as the legitimate
government of the Western Sahara. Haidalla
subsequently appointed Taya Chief of Stgff of the
Armed Forces, a position he held until the coup.
one of the highest rates of urbanization in the world-
and the construction of villas in Nouakchott's new
northwest residential quarter are prompting queries
about corruption. Crime-always low by Western
standards-is increasing at a sufficiently high rate to
catch the attention of the government-controlled
media.
A Mendicant Nation
Mauritania's small economy is the primary source of
national frustration. A per capita GDP of $450 ranks
Mauritania among the poorest nations in the world, a
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NESA NESAR 85-026
6 December 1985
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situation that is worsened by a sharp disparity in the
distribution of wealth. The agricultural sector has
been especially hard hit by recurrent drought,
managerial ineptitude, and lack of investment.
Agriculture employs about 60 percent of the
population but produces less than 5 percent of GDP.
Grain production of 20,000 tons this year is down by
80 percent from levels in the late 1970s and meets less
than 20 percent of domestic demand. GDP growth has
averaged only 1 percent annually over the last five
years, about half the rate of population increase,
prompting a marked decline in living standards. ~
Mauritania is in constant need of concessional
assistance to keep its economy afloat. Foreign aid
accounted for 30 percent of budgetary receipts last
year. Moreover, the government has borrowed heavily
to support development and, to an increasing extent,
food imports. Chronic foreign payments problems and
mounting debt service costs on the nation's $1.4
billion debt have brought the financial system to its
knees. The government narrowly averted financial
collapse last spring by putting large amounts of scarce
foreign exchange into several failing banks. The
regime successfully completed a Paris Club debt
rescheduling in April, but with only $64 million
remaining in foreign exchange reserves-about three
months of import coverage-Nouakchott probably
will again fall behind on debt obligations of $74
million payable next year.
Mismanagement is manifold throughout the economy.
The government continues to move ahead with plans
to reopen its long-dormant copper mine with the help
of wealthy Arab states-Algeria is a key backer,
according to the US Embassy in Nouakchott. The
project, however, has no assured market for the ore
and is plagued by high mining costs. Moreover, plans
to proceed with the $20 million rehabilitation of the
country's only oil refinery is contrary to World Bank
recommendations that the refinery remain closed
because of high production costs, poor prospects for
oil supplies, and a weak domestic demand for oil.
Fishing is a potential bright spot. A recently signed
accord with Moscow provides financing and ships to
exploit Mauritania's marine resources. None of the
Current account balance
- 261
- 384
- 301
- 301
-196
Trade balance
-117
-186
-63
-95
0
Exports, f.o.b.
271
239
315
285
290
Of which:
Iron ore
169
135
131
150
140
Fish
99
96
161
134
144
Imports, f.o.b.
388
425
378
380
290
Of which:
Food
113
93
93
65
85
Services (net)
-123
-167
- 208
-181
-170
Private transfers
-21
-31
-30
-25
-26
fish, however, will be processed in Mauritania, and
the government has only a limited capability to police
the catch. In our view, Moscow will reap the lion's
share of the benefits from the accord.
Foreign Policy Concerns
Coping with economic problems is complicated by
foreign policy demands, particularly the Western
Sahara issue. Taya cited his predecessor's pro-
Algerian stance as a critical reason for his overthrow.
Taya has moved to adopt a more balanced posture
toward both Algiers and Rabat. Correspondingly,
relations have cooled with the Polisario Front, which
Haidalla officially recognized in 1984. Relations with
Morocco had been strained since the alleged
Moroccan-backed coup attempt against Haidalla in
March 1981. Taya hoped that by taking a balanced
position he would avoid reinvolvement in the Western
Sahara. Instead, growing pressure from both Morocco
and Algeria to take a side threatens to divide the
regime.
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President Taya has told the US Embassy that his
government is subject to continued Algerian pressure
on behalf of the Polisario at the same time it receives
strongly worded messages from Morocco. Rabat has
threatened to engage in hot pursuit into Mauritania if
Nouakchott cannot control Polisario activity in the
border area. In addition, the Polisario has asked for
permission to establish an embassy in Mauritania,
transit rights for Polisario military units through
Mauritania, the right to resettle the Polisario in
camps on Mauritanian territory, and access to
provisions for military units.
We believe Mauritanian military leaders suspect that
the shift in fighting southward is part of an attempt
by Morocco to move the war to neutral territory.
Nouakchott's inability to control Polisario activity
could produce severe strains in Taya's military
cabinet, particularly if Morocco carries out its threat
of hot pursuit. Some officers believe a confrontation
with either Morocco or the Polisario guerrillas is
necessary to preserve Mauritania's territorial
integrity, but the majority of black soldiers view the
dispute as an Arab rivalry and would resist renewed
involvement. A similar split led to the military coup in
1978 by Taya's predecessor. Moreover, in our view,
Taya's policy of neutrality might put Mauritania in
the unenviable position of having to face all
contenders.
Taya also worries about Libyan machinations in his
country and remembers Qadhafi's efforts to
destabilize previous regimes in Nouakchott.
Libyan goals
include opening a consulate in Nouadhibou,
establishment of a revolutionary committee,
installation of a radio transmitter, and landing or
overflight rights. In our view, Taya will not grant the
first three objectives but may acquiesce on privileges
for Libyan aircraft because that would not involve an
increased Libyan presence in Mauritania and might
result in some aid for Nouakchott. Landing rights at
Nouakchott would allow Libyan planes the transit
point needed to ship military equipment to Latin
America.
The Role of the Military
Taya's principal asset is his continued popularity in
the military. Taya has been prompt in meeting the
needs of the military. The US Embassy reports that
salaries are paid on time, living standards are
maintained, and modest upgrading of equipment is
under way. This policy, however, puts undue stress on
the budget and sharply reduces funds available to
meet the needs of the country's burgeoning poor. The
President-though of Moorish descent-strongly
favors increasing the percentage of blacks in the
junior officer ranks. Blacks make up the majority of
enlisted personnel, and such a move could provide him
with broader based support than any other Moor
leader since independence. Nevertheless, in our view,
this move could backfire by splitting the military
along ethnic lines and prompting senior Arab officers
to engineer a coup to maintain the status quo.
Outlook
In our view, Taya faces almost insurmountable
barriers in solving Mauritania's economic and foreign
policy problems. Shortfalls in food and employment
are a certainty for the near term. If the drought
continues, its effect on agricultural production and
rural migration will place increased strain on the
government to meet basic human needs. The most
crucial factors for overcoming these problems-a
massive infusion of money and a guaranteed water
supply-are largely beyond Nouakchott's control for
the foreseeable future, and it will remain heavily
dependent on outside help.
The President's major foreign policy concern almost
certainly will be the Western Sahara. Mauritania will
be under pressure from all sides in the war,
particularly with the extension of Morocco's defensive
berm shunting the conflict increasingly into the
triborder area. Taya almost certainly will try to
forestall entry of Moroccan troops into Mauritania to
engage the guerrillas. At the same time, his own
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military is incapable of preventing Polisario forces
from using Mauritania as a base to attack Moroccan
positions.
If Taya cannot show progress on the economic front
or keep the Polisario problem under control, he may
not survive next year. In the meantime, Taya's
weaknesses will provide openings for Libya, Algeria,
and Morocco to compete for a dominant voice in
Nouakchott.
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