(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84T00301R000200010211-1
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 13
• Document Creation Date: January 12, 2017
• Document Release Date: August 12, 2010
• Sequence Number: 211
• Publication Date: April 29, 1982
• Content Type: REPORT

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Director of
Central
Inteffigence
N
29 April 1982
Top Seeret---
CPAS NIDC 82-1000
25X1
29 April 1982
Copy 402
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Top Secret
UK-Argentina: Heightened Military Preparations . . . .
USSR: Industrial Output . . . . . . . . . . . . . . . . . 6
Mozambique-Portugal: Military Aid . . . . . . . . . . . . 7
Mexico: Skepticism on Stabilization Program . . . . . . . 9
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UK-ARGENTINA: Heightened Military Preparations
//The extended British blockade reflects the imminent arrival
of the UK's naval forces near the Falklands. Argentina is inten-
sifying its preparations and may be considering a preemptive strike.
The British Government yesterday announced a full
air and sea blockade of the Falkland Islands to begin
tomorrow. Civilian and military ships and aircraft of
any country that violate the blockade will be subject to
attack.. The British also announced that the airfield at
Port Stanley will be closed, and that aircraft on the
ground will be regarded as hostile.
Comment: //The announcement reflects the likelihood
that British naval forces will be in position tomorrow
to support the blockade. London apparently is pessimistic
about Argentina's acceptance of the latest US proposals.
Labor leader Foot--who continues to prepare his party to
take advantage of a military disaster--probably will
denounce the government's decision in Parliament today,
but Labor backbenchers still show considerable sympathy
for the government's position.//
Argentine Military Activity
//Argentina's preparations for a British attack are
intensifying. Coastal defensive forces are on maximum
alert, and journalists have been ordered to leave coastal
towns in the war zone. According to press reports,
Buenos Aires is considering a preemptive airstrike on
British naval units before the blockade goes into
effect.//
Top Secret
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accept the high risk involved in a preemptive strike
only if they believe that they could cause substantial
Comment: The Argentines probably are prepared to
damage to a major British warship.
The Diplomatic Front
sign of Latin American solidarity.
The OAS yesterday approved by a vote of 17?0 with
four abstentions a resolution backing Argentina's claims
to sovereignty over the Falklands and calling for an
immediate truce and withdrawal of forces under UN Secur-
ity Council Resolution 502. The final resolution mirrored
a draft approved on Tuesday, which the Argentine media
and government are touting as a diplomatic triumph and a
--continued
Top Secret
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The OAS's support for Argentina's claim, which for
legal reasons Argentina believed could not be considered
by the OAS, came as welcome news to Buenos Aires. The
resolution is aimed at discouraging the UK from launching
an assault in the face of strong Latin American backing
for Argentina.
Argentine Economic Uncertainty
Public concern is increasing in Argentina about the
economic impact of the financial panic caused by the
crisis. The Minister of Interior has publicly appealed
to the people to stop withdrawing funds from bank accounts.
Funds are being rapidly depleted as depositors move into
dollar accounts in Uruguay and Switzerland, and interest
rates have risen substantially as banks struggle to hold
on to funds.
Comment: The Interior Minister's announcement is
likely to increase uncertainty over the government's
ability to control the situation, precipitating further
runs on deposits.
//A senior Foreign Office official, in answer to a
parliamentary question on Tuesday, said that London has
asked Israel to halt arms sales to Argentina. According
to press reports, Israel will abide by its signed con-
Comment: //The parliamentary question was almost cer-
tainly prearranged to publicize British concern that the
Israelis may be supplying Buenos Aires with advanced
weapons that could be used against the task force.
London probably hopes to put additional pressure on Tel
Aviv, including from the US, to stop arms sales.//
Top Secret
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I
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Soviet Developments
either side in the conflict."//
//A Soviet Deputy Foreign Minister told the British
Ambassador in Moscow on Tuesday that Moscow has told the
Argentines that there is "no hope that the USSR will join
the UN.//
Comment: //Despite their private protestations to
the British of evenhandedness, the Soviets have continued
publicly to side with the Argentines and have privately
assured them of support in international forums such as
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USSR: Industrial Output
year than any comparable time since World War II.
Soviet industry grew Zess during the first quarter of this
which grew by only 2 percent.
The Central Statistical Administration's report
issued last week indicates that civilian industrial out-
put was only 0.6 percent above that achieved for the
comparable period last year, and labor productivity did
not grow at all. In four of the 10 major industrial
categories, including ferrous and nonferrous metals,
construction materials, and soft goods, production
ranged from 0.5 to 5 percent below levels of 1981.
Metals shortages have been cited by the press as the
main problem affecting the civilian machinery sector,
Natural gas production increased nearly 7 percent
and electric power 2.8 percent. Oil and coal output-
however, were virtually unchanged from last year.
may force further revisions to investment plans.
tinued shortfalls in metals and machinery production
Comment: Moscow will be deeply concerned about
the slowing rate of industrial growth, which could hurt
investment, consumer, and even defense programs. The
poor harvest in 1981, for example, ensures continued
stagnation or possibly a decline in the food and soft
goods industries through at least mid-1982, while con-
would be a record postwar low.
Industry's poor performance could receive consider-
able attention at the party plenum, which may be held
next month. Some improvement is likely by the end of
this year, and industrial production may grow some 1 to
1.5 percent during the year as a whole, but this still
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MOZAMBIQUE-PORTUGAL: Military Aid
A military cooperation agreement concluded by Mozambique and
Portugal on Tuesday is a sign of President MacheZ's frustration
over his regime's reliance on Moscow.
Portugal agreed to provide Mozambique with 10,000
light weapons and other items. Mozambican personnel
will also be trained in counterinsurgency tactics in
Portugal.
Comment: The accord was concluded during a visit
to Maputo by a high-ranking military delegation, but its
outlines apparently were worked out during President
Eanes's visit to Mozambique last November. It is
Mozambique's first military cooperation pact with a
Western country since independence in 1975.
The new agreement reflects Machel's desire to re-
duce Maputo's dependence on Moscow. Despite considerable
Soviet military aid, the Mozambican military remains
unable to defeat the National Resistance Movement insur-
gents. The agreement also is the most important step
Portugal has taken since its revolution to establish
a security relationship with a former colony.
Although Portugal's assistance will not jeopardize
the USSR's position as Mozambique's principal source of
military assistance, the Soviets--and pro-Moscow ideo-
logues within the Mozambican Government--almost certainly
will be unhappy over the accord. Moscow already appears
uneasy over signs that Eanes's visit to Angola in mid-
April could lead to closer economic and possibly military
cooperation between Lisbon and Luanda.
Terms of payment for the Portuguese assistance to
Mozambique evidently have not yet been worked out.
Agreement on terms could prove difficult to attain,
particularly in view of the economic problems both coun-
tries face.
The accord could place new strains on Portugal's
relations with South Africa, given Pretoria's support
for the National Resistance Movement. The new pact also
may lead the insurgents to increase acts of violence
against Portuguese citizens in Mozambique.
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MEXICO: Skepticism on Stabilization Program
The peso's continued decline reflects the skepticism
among the public about the government's willingness to
enforce its stabilization program rigorously. To help
stem capital flight, the government has raised short-
term interest rates substantially, and it has raised
reserve requirements to limit credit expansion.
Comment: The government appears committed to en-
forcing a tough austerity program, although it apparently
has not yet taken the essential step of cutting its own
spending. To restore the confidence of the business
community and foreign lenders, some current government-
funded projects will have to be reduced, funds for new
investment denied, and food subsidies and other welfare
programs curtailed. The Lopez Portillo administration
probably prefers to wait until after the elections in
July to impose measures that will substantially increase
prices and unemployment, but continued capital flight
may force it to move sooner.
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Top Secret
Top Secret
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