THE INTERNATIONAL ARENA IN 1986

• Document Type: FOIA
• Collection: FOIA Collection
• Document Number (FOIA) /ESDN (CREST): 05619396
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 14
• Document Creation Date: February 24, 2023
• Document Release Date: February 24, 2023
• Case Number: F-2014-00485
• Publication Date: February 7, 1986

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ET
NR
THE DIRECTOR OF
CENTRAL INTELLIGENCE
National Intelligence Council
NOTE TO: DCI
DDCI
21 Feb. 1986
.00
Attached please find another of L
special forecasts, this a world vie IVI WIC ycal
1986. Points he particularly stresses are:
1. Falling oil prices, especially, will lead to
a more serious debt crisis than in 1982, and
countries like Mexico and Nigeria will lead the
way in expanding the Peruvian �approach of
unilaterally declaring limits on how much they will
pay back each year.
2. Gorbachev will conduct the most vigorous
Soviet peace offensive yet, the focus on helping
bring leftist governments to power in West Germany
and Great Britain.
3. The PRC will seriously reopen the Taiwan
question in 1986.
4. There will be a high level of domestic
political turmoil in South Korea, which North Korea
will seek to exploit.
5. The Labor-Likud governing arrangement will
break down in Israel.
//
Harold P. Ford
cc: C/NIC
All NIOs
NIC/AG
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7 February 1986
MEMORANDUM FOR:
THROUGH
FROM NR
SUBJECT
Director of Central Intelligence
Vice Chairman, National Intelligence Council
Special Assistant for Warning
The International Arena in 1986
1. There will be no significant changes this year in the pattern of
East-West relations or regional power equations that have prevailed in the
past half decade. Sharp political competition centering on Gorbachev's
bold "peace offensive" will dominate US-Soviet relations. Soviet political
strategy, aimed primarily at influencing the outcome of critical national
elections in West Germany in January 1987 and in Britain the following year,
will preclude provocative or high-risk initiatives that might trigger
unwanted confrontations with the US. The greatest potential for political
surprise this year will reside in a possible decision by China to reopen the
Taiwan question and in the regional fallout from a collapse of the Labor-
Likud coalition government in Israel.
2. The most urgent problems facing the Administration will stem from
essentially unforeseeable consequences of two major developments: a fall
in oil prices to $15 to $20 a barrel and the US deficit reduction process
under Gramm-Rudman. Prospective declines in the dollar's value, real interest
rates in the US, and the US trade deficit will reduce, if not remove, the
principal sources of economic growth during the last two years in Western
Europe, Japan, and the developing countries. If these governments do not
adopt more expansionary policies, Europe and Japan will experience various
degrees of economic stagnation, and Third World countries will encounter
even more intractable problems in servicing foreign debts.
International Economic Outlook
3. 1986 will be a volatile year. The world financial structure will
experience severe strains that will exceed those induced by the recession
and Mexico's financial crisis in 1982. The crunch will appear in the last
two quarters, with a 50 percent chance of debt crises involving two or more
countries. Leading debtors such as Mexico, Argentina, Brazil, and Nigeria
will avoid formal defaults but there will be a strong possibility of unilateral
reductions in interest payments, following precedents set by Peru and Nigeria
in limiting payments to no more than 10 percent and 30 percent of export
earnings. Most debtor countries will become more assertive in demanding
concessions in rescheduling arrangements, and they will echo the declaration
of Latin American econcuicministers in December that growth must have higher
priority that repayment of debts. These demands will be accompanied by
growing agitation for a restructuring of world debt and reconstruction of the
international financial system.
sgeer:
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4. Mexico, and perhaps Brazil, Venezuela and Argentina, will confront a
choice either to maintain austerity measures in order to meet scheduled interest
payments, thereby risking domestic political stability, or to declare major
reductions or moratoriums on payments. Time is running out, and the fall in
oil prices will hasten the day of decision. A substantial increase in bank
and official loans to major debtors would avert another payments crisis for
a year or two, but a policy of increasing the debt burden and curtailing
domestic investment and imports will not be politically acceptable in the
longer term. In the next year or so, more Third World debtors will emulate
Nigeria's example in rejecting IMF austerity agreements, gambling that this
can be done without incurring major economic or political penalties because
banks will have no choice but to reduce interest rates and stretch out re-
payments.
5. The decline in oil prices will have cumulative effects on the debt
prdblem. The drop in price in the last three months already has exceeded
the projections of most industry economists, and it has inspired the Saudi
strategy to force price reductions to the point that Britain, Norway and
other non-OPEC producers will be dbliged to negotiate a general producers'
agreement on production levels and prirPs. Although conventional wisdam
in the industry appears to anticipate such an agreement because of the magni-
tude of the stakes in an unrestrained price war, OPEC will fall well short
of its goal of recapturing a "fair market share" for all 13 members. More-
over, Saudi Arabia's calculated risk in attempting to enforce its role as
the crucial "swing producer" will fail in the next 12 to 18 months.
Soviet Political Strategy
6. The Gorbachev leadership this year will mount the most vigorous and
resourceful peace offensive since World War II. The principal vehicle will
be Gorbadhev's grandiose program of 15 January for a three-stage process
culminating in the elimination of all nuclear and chemical weapons by the
year 2000. Other initiatives in the coming year may include an easing or
ending of Andrei Sakharov's internal exile and a schedule for partial with-
drawal of Soviet forces fram Afghanistan. The peace offensive will be aimed
primarily at encouraging political forces that Moscow hopes will incrPasingly
alienate Western Europe from the US and determine the outcome of the Bundestag
elections in January 1987 and British elections the follawing year. Soviet
arms control initiatives, particularly on INF, will be calculated to exploit
the polarization among and within the major West German political parties
created by the debate over INF deployment in 1980-83. The Soviets perceive
historic opportunities to capitalize on the collapse of the 30-year West
German consensus on foreign and security policies. Soviet initiatives will
be tailored to encourage the Social DemocraW to adapt positions designed
to capture what Chairman Willy Brandt calls the elusive "majority to the left
of the CDU."
7. West Germany, Britain and the Netherlands will be the main targets
of frequent manipulation of Gorbachev's ambiguous references to a separate,
interim agreement on intermediate-range missiles in Europe. Gorbachev will
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use his visit to Italy this spring to announce ostensibly attractive new
proposals for an INF accord. His immediate aim will be to strengthen the
prospects of the anti-INF Labor Party in the May elections in the Netherlands.
A Labor victory would be a significant breakthrough for the Soviet scenario
in 1986 because a new Labor goveinment would repudiate both the present
government'sINF deployment decision and the basing agreement for cruise
missiles.
8. West Germany, however, will be Moscow's prime target. Gorbachev's
suggestion that the second US-Soviet summit meeting be deferred until autumn
reflects a calculation that the impact on West German opinion of the
arms control and political pronouncements he plans to make in the US will be
magnified the closer the visit comes to the January elections in the Federal
Republic. The Soviets are convinced that the erosion of West German public
confidence in NATO's traditional security and arms control policies has made
the Bonn government vulnerable. Chancellor Kohl has attempted to contain
the damage by repeatedly emphasizing his commitment to arms control and by
promoting the notion of an interim accord on INF. Gorbachev attempted to
turn this tactic against Kohl by surfacing his own proposal for a separate,
interim INF agreement during his visit to Paris last October. The thrust
of Gorbachev's message throughout 1986 was illustrated by his speech at a
dinner for Italian Communist leaders on 28 January: "If we managed to
eliminate the Soviet and American medium-range missiles on our continent
without delaying or burdening the matter with other problems, we would unravel
what is perhaps one of the complicated tangles in present-day world politics
and would significantly cleAr the way toward a radical reduction of nuclear
weapons and then their complete elimination."
9. The Soviets of course will be operating on the assumption that
neither Bonn nor Washington, having invested so much political capital in the
protracted contest over INF deployment, will seriously consider "eliminating"
the INF missiles. In sum, manipulation of the notion of a separate INF accord
will be the cutting edge of Gorbachev's peace offensive, with the ultimate
aims of undermining the Kohl government's political authority and electoral
prospects, forcing the Administration to reject what will be portrayed as a
genuine opportunity, in Gorbachev's words, to "free the European Continent
of nuclear weapons," and enhancing the chances of a Social Democratic victory
next January.
Soviet Policy Toward the United States
10. Soviet political strategy will focus on repeated attempts to corner
the Administration into rejecting seemingly constructive arms control proposals.
The central purpose of Gorbachev's three-stage nuclear disarmament plan was
to lay the foundation for this strategy. Moscow's principal tactic will be
to draw the Administration into assigning top priority this year to an interim
accord on INF. In private contacts and public statements, the Soviets will
actively promote the idea that INF reductions could go forward without an
agreement on strategic and space weapons.
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U. The Soviets are convinced that the US, West Germany and Britain
will be unwilling to consider a complete removal of the Pershing II's and
GLCMs. They have taken the precaution, however, of 'guarding against a
Western surprise by inserting in Gorbachev's plan a number of conditions
judged to be totally unacceptable: (a) the US must pledge not to transfer
its strategic and medium-range missiles to other countries under any circum-
stances; (W Britain and France must agree not to build up their own
nuclear forces; (c) the US must follow the Soviet Union's example and end
all nuclear explosions and then join in calling on other states to halt
testing; (d) other nuclear powers must freeze their nuclear weapons, end
testing, and "begin to join in nuclear disarmament." Finally, the Soviets
plan to counter an expected Administration demand that they reduce sharply
the number of SS-20s in Asia by making an agreement contingent on a corres-
ponding cut in American mid-range weapons in East Asia and the Western
Pacific. Soviet spokesmen already have contended that the mission of SS-20s
in Asia is to counter US nuclear capabilities in the region and implied that
US carrier-based aircraft and aircraft based at Misawa on Hokkaido Island
must be included in any trade-off.
12. There will be no retreat this year from the three cardinal points
of Soviet arms control policy: (a) strategic weapons must be defined as
including all systems capable of "reaching each other's territory," and
any definitive long-term accord on INF must be an integral part of an agree-
ment on strategic weapons; (b) an agreement on strategic weapons is possible
only if the US joins the USSR in renouncing the development, testing, and
deployment of "space strike arms"; (c) fram the outset of any arms reduction
process, the US must end all nuclear testing. The Gorbachev leadership has
no illusions about the negotiability of this package. Proposals are deliber-
ately framed to elicit US criticism and rejection, which can then be used
to "document!' charges that the Administration is irrevocably committed to
achieving strategic superiority and a first-strike, capability. As Gorbachev
put it in his 4 February interview with L'Humanite, "These proposals are a
kind of 'moment of truth.' They make our partners in the talks show their
real worth and reveal the aims their policy is really pursuing." He charged
that the US is "determined to continue the arms race come what may."
13. In sum, the Soviets will not modify either their political strategy
or the fundamental assessment of the Administration's intentions which they
first articulated in the spring of 1981. As recently as 25 January, Izvestia's
senior observer, Aleksandr Bovin, restated the judgment he has regularly
voiced over the past five years: "Frankly speaking, I think...that while the
current Administration is in the White House in the United States, I can hardly
see us agreeing on some major issues with the Americans. The factions of the
American bourgeoisie now in power in the US and whose interests are repre-
sented by Reagan will hardly agree to reducing or slowing the arms race because
of their material interests." These public assessments of Administration
intentions, of course, are simply a device to enhance the credibility of
Soviet policy and purposes in the contest for world opinion, particularly in
Western Europe. Soviet diplamacy and propaganda will hammer relentlessly on
the alleged contrast between the Soviet Union's peaceful aspirations and what
Gorbachev describes as the "militarization" of the US economy and "even of
political thinking." Gorbachev fully shares Andropov's basic calculation that
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the Administration's foreign and defense policies can be successfully mis-
represented and exploited in a climate of growing "contradictions" between
American and European political and economic interests. This calculation
underlies Gorbachev's constant invocation of the "tremendous significance"
of the world public's desire for peace and an end to the arms raice, as well
as his sermons about the "special responsibility" of the two superpowers
and his appeals for a "decisive break" with "stone age ways of thinking"
and for policies that "rise above national egoism."
14. The geopolitical ambitions that shape Soviet arms control policy
and political warfare tactics will lead Gorbachev to focus on SDI, nuclear
testing, and INF in his second meeting with President Reagan. He will
elaborate on his offers of on-site inspection and volunteer a willingness
to consider "untying" his three-stage arms reduction program so that separate
accords on such it as INF and chemical weapons might be negotiated. This
approach will be calculated to demonstrate the Soviet Union's readiness to
produce "specific and concrete results" at the second summit and to prepare
the ground for subsequent complaints that "the US side so far has not proved
to be ready for major decisions." (Gorbachev's summit report to the Suprebe
Soviet on 27 November 1985) In sum, the Soviet leader's prime concern during
his visit to the US will not be to explore areas of possible accommodation
but rather to build a case that will impress West European opinion with
the need to disengage from American leadership and pursue independent policies
toward the USSR.
15. In the months before Gorbachev's visit to the US, the Soviets will
make a concerted effort to project an impression of significant progress
toward a normalization of relations with China. They will attach great
importance to strengthening their position in the strategic triangle as a
crucial element in influencing foreign perceptions of the global "correlation
of forces." The Soviets are anxious to have Foreign Minister Wu Xuegian visit
Moscow before the second US-Soviet summit, and they have announced that Wu
has agreed to make this visit in May or June, with Foreign Minister Shevardnadze
reciprocating with a trip to Beijing late this year. If MI's talks in
Moscow yield satisfactory results, the Soviets probably will try to arrange
a summit meeting between Gorbachev and Deng Xiapping or General Secretary
Hu Yadbang, or one between Presidents Gromyko and Li Xiannian, before
Gorbachev's trip to the United States.
16. Although the Soviet peace offensive in early 1986 assigns a key
tactical role to proceeding with a second US-Soviet summit, this scenario
could be Changed by foreign or domestic developments in the next six months.
If Gorbachev's nuclear disarmament plan and other politidal initiatives have
not produced the intended effects by midsummer--in particular, favorable
prospects for an SPD electoral victory next January--the general secretary
will come under strong pressure from elements in the party and military hierarchies
to back away fram another summit and from the invitation to President Reagan
to visit Moscow in 1987. Considerable skepticism exists within Soviet elites
about the efficacy of summitry as an instrument for advancing Soviet geopolitical
objectives. Gorbachev tacitly acknowledged this skepticism in his post-Geneva
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summit speeches in which he struck a defensive tone in explaining the
decision to open a dialogue with the head of an Administration which, in
the general secretary's words, "openly took a course toward confrontation,
rejecting the very possibility of a positive development of Soviet-US relations."
This rhetoric and the obvious aMbivalence of his claim that "we are right in
saying that the overall balance of Geneva is a positive one," suggest that
Gorbachev is leaving the door open for an abrupt shift in course. This
calculated aMbiguity also was evident in his remark to Senator Kennedy on
6 February that a second summit "would have no sense" unless it could "yield
practical results, produce serious shifts in the directions that are of
greatest importance for the cause of peace." The general secretary implied
that Soviet agreement to a specific date would depend on progress toward an
agreement to remove all intermediate-range missiles from Europe.
17. As of early February, the Soviets still intend to go forward with
a second summit, provided they can secure the Administration's agreement
to defer it until late November or December--timing calculated to maximize
the meeting's impact on the West German elections. However, if the Soviets
conclude next summer that a Social Democratic victory is beyond reach and
that the Administration's approach to the second summit is likely to fore-
close Soviet political gains, the odds will rise sharply that Gorbachev will
postpone his visit to the US indefinitely, contending that the Administration's
defense and arms control policies had ruled out all possibility of achieving
"practical results."
Sino-American Relations
18. There is at least a 50 percent chance that Beijing will reopen the
Taiwan question in the next 12 months by demanding that the US establish a
specific date for ending arms sales to Taiwan, endorse China's "one country,
two systems" formula as the basis for reunification negotiations, and undertake
a direct role as mediator to overcame Taipei's refusal to negotiate "peaceful
reunification." Chinese leaders have been preparing the ground for this
initiative since late 1984. General Secretary Hu Yadbang's decision last
month to postpone his expected visit to the US this year may have been
motivated by a desire to avoid an impression of cordial bilateral relations
that would undermine the credibility of renewed demands for resolving the
Taiwan problem.
19. Although the "reformist" group led by Deng Xiaoping, Hu Yaobang,
and Premier Zhao Ziyang strengtholidits political authority last September by
a major shake-up in the Politburo,gecretariat, and Central Committee, there
has been evidence of considerableAagreement within the party elite over the
scope and pace of Deng's domestic reforms. The key imponderable in assessing
China's intentions is the possibility that strategy on the Taiwan issue will
become entangled in struggles over damestic policy and power. If this should
occur, Deng and his principal lieutenants may find it expedient to Abandon
their ambiguous and temporizing stance on Taiwan and shift to pressure tactics
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threatening that if the US doPs not agree to end arms sales and deliver
Taiwan to negotiations, Beijing will be free to jettison its policy of
peaceful settlement.
20. If US-Soviet relations take an abrupt downturn as a result5of an
impasse at the second summit or an indefinite postponement of Gorbachev's
visit to the US, the odds favoring rend Chinese demands would increase
substantially. China's moves to improve the atmospherics of relations with
Nbscaol during the past year were intended to enhance Beijing's negotiating
leverage with Washington. In view of the Chinese leaders' sanguine view of
their position in the strategic triangle, they would perceive a sharp
deterioration in US-Soviet relations as creating favorable opportunities
to force a test of nerves with the Administration over Taiwan. In this
contingency, there would be a considerable chance of Chinese miscalculations
because they would reason that renewed confrontation with the USSR would
enhance the Administraticn's incentive to avoid a simultaneous downturn in
Sino-US relations.
The Koreas
21. Political dynamics in South Korea this year will increase the chances
of violent confrontations between President Chun Doo Hwan's government and
the opposition New Korea Democratic Party. The government's strong reaction
to the launching of the NKDP's nation-wide petition drive demanding direct
presidential elections in 1988 and other constitutional revisions underscores
its determination to repress any challenge to Chun's authority. There is a
60 percent chance that NKDP activists and university students will mount
street demonstrations this spring in an attempt to provoke the government
into imposing draconian emergency measures.
22. The North Koreans are anticipating political violence in the South.
They will announce new initiatives such as a proposal for a North-South summit
meeting in an effort to encourage Chun's domestic opponents and inhibit his
freedom to justify a crackdown by invoking the usual "threat from the North."
President Kim Il-song's New Year's address voiced support for the "just
struggle" in the South against "oppression and persecution." The North
Koreans will intensify their campaign to expand trade and exchanges of visits
and agitate their proposal for a single Korean team to compete in the Asian
Games in Seoul this year and in the Summer Olympics in 1988, also in Seoul.
Kim Il-song believes that Chun Doo Hwan will attempt to perpetuate his power
by amending the constitution that limits him to one term or by employing
extra-legal means to designate his successor in 1988. Kim therefore anticipates
a period of growing volatility in South Korean politics in the next two years
that will open unprecedented opportunities for North Korean political
exploitation and subversion.
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The Philippines
23. Post-election passions and hostilities will subside after a few
weeks of protest demonstrations and rhetoric. Government security forces
will be able to control the protests without resorting to the kind of
draconian repression that might trigger an unmanageable breakdown in public
order. However, the repercussions of the ill-advised snap election and
Marcos' declining health and vigor will gradually erode his political authority.
The Communist Party and New People's Army will attempt to exploit post-election
confusion and recriminations by mounting urban violence and subversion, but
the security forces will be able to contain this threat. There will be
another upsurge of political protests and violence if the ruling party engages
in conspicuous attempts to rig the local elections next May.
24. The evolution of events since the assassination of Benigno Aquino
in August 1983 has set the Philippines on an irreversible course of transition
to a new political order in the post-Marcos era. Marcos will 'retain the
support of the bulk of the armed forces through the remainder of his incumbency,
and he will be able to maintain a tolerable degree of internal order and
national administration in the next year or two. In the longer term, there
will be at least an even chance that establishment leaders in the ruling
party, the political opposition, the business community, the church, and the
military will gradually work out understandings that will ease the country
through a difficult transition period.
Arab-Israeli Relations
25. In contrast to the relative stagnation and temporizing that characterized
1985, the next 12 months will witness an acceleration of political dynamics
and change in both the Arab states and Israel. Events will be dominated by
repercussions from three major developments: (a) King Hussein's moves to
arrange an accommodation with Syria in the aftermath of the failure of his
scenario for bringing the PLO into negotiations with Israel and the US, and
the indefinite postponement of US arms sales to Jordan; ( b) an intensifica-
tion of the struggle for control over an increasingly polarized PLO; (c) political
initiatives by Prime Minister Peres to split the Likud bloc and break up the
coalition government before Yitzhak Shamir takes over the premiership as
scheduled on 1 October.
26. The political contest in Israel will aggravate rivalries among the
Arab states and Palestinian factions that will harden reactions to Israeli
moves. In May or June, Peres will announce plans to unilaterally impose
autonomy in the West Bank and the Gaza Strip by late December. Labor Party
leaders will portray this plan as an interim arrangement pending negotiations
for a comprehensive peace agreement with Jordan. The autonomy plan will not
apply to the strategic Jordan Valley, greater Jerusalem, or Jewish settlements
in the West Bank and Gaza. With these exceptions, Palestinians would be granted
control over the administration of municipal affairs, agriculture, education,
justice, finance and taxation, and other services.
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27. The political purpose of the autonomy plan, which Likud strenuously
opposes, will be to split the Likud bloc and its dominant Herut Party and
force Likud to withdraw from the coalition government. The Labor Party will
then farm a new government with several small religious parties. This
scenario, however, will carry a high potential for igniting a political
upheaval. Likud leaders will attempt to preempt Labor's ploy by creating a
cabinet crisis and taking Likud into the opposition on a platform of no
concessions of any kind to Jordan or the Palestinians. There will be a good
chance that Shamir will be replaced by Ariel Sharon as Likud leader, with
the result that Likud's policy will become even more intransigent on negotia-
tions with Jordan. One effect of a deliberate breakup of the Labor-Likud
coalition will be to strengthen the appeal of ultranationalist right-wing
parties at the expense of both Labor and Likud.
28. A cabinet crisis in Israel will trigger Sharper competition among
rival Palestinian factions and result in an upsurge in terrorist actions
against the Israeli presence in the Occupied Territories and Israel proper,
as well as more frequent attacks on American targets in the Middle East and
Western Europe. Arab governments, including Egypt, will portray the autonomy
plan as an irreversible step toward formal annexation of the West Bank and
Gaza. Political disarray in Israel will be exploited by the Syrians to
intensify Shiite and Palestinian pressure on the Israeli military presence
in southern Lebanon. President Assad, however, will continue to avoid major
provocations such as a limited attack on the Golan Heights that would
unleash strong Israeli reprisals against Syrian clients and military facilities
in Lebanan or against Syria itself.
29. Assad will become more aggressive in seeking to oust Arafat and
bring a reunified PLO under Syrian control. Having succeeded in blunting
the Jordanian-PLO initiative on negotiations with Israel and obliged King
Hussein to pursue an accommodation with Syria, Assad will press harder to
secure predominant influence over Arab policy, at the expense of Jordan,
Egypt, and Saudi Arabia. This Change in power relations within the Arab
world will pose particular dangers to King Hussein's position. The general
aggravation of Arab-Israeli tensions, a significant escalation of unrest
and terrorism in the West Bank, and the return to Jordan of thousands of
Palestinians discharged fram Gulf oil fields because of the fall in oil
prices and output will create a potentially explosive situation in Jordan
in the next 12 to 18 months.
Iran-Iraq
30. The war will intensify this year as both Tehran and Baghdad gamble
that even minor successes will demoralize enemy forces and civilian popula-
tions and trigger internal upheavals. Both regimes are exaggerating the
adversary's vulnerability to domestic revolts or coup attempts. In Iran
there will be a growing likelihood of showdowns between competing factions,
especially if a deterioration of Khomeini's fragile health removes his
moderating influence. His mediation was crucial in averting violent clashes
between radicals and conservatives last year. A major military setback could
ignite a test of strength instigated by private militias organized by
radical Revolutionary Guard leaders.
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31. Even an intensified domestic struggle will not impair the Iranians'
confidence in their capacity to outlast Saddam Hussein in a protracted war
of attrition. Evidence of growing military and civilian frustration over
Saddam's inability to end the war will encourage Iran to mount further
limited offensives, such as the Capture of Al Faw. There will be-a 40 percent
chance of an attempt by senior Iraqi military officers to oust Saddam before
the end of the year. These odds will increase if Iraqi forces fail to
dislodge the Iranians fram their bridgehead at Al Faw. Iran's tenacity
and performance seen to have led the Soviets to judge that the war is
gradually turning against Iraq--a revised assessment reflected in the
decision to send Deputy_ Foreign Minister Korniyenko to Tehran and to
adopt a more conciliatory attitude. Although the Iranians will persist
in pressuring the Gulf states to halt financial and logistic support to
Iraq, they will not carry out their threats to close Hormuz or make a
sustained effort to interrupt international shipping in the Gulf.
Central America
32. Events in the first half of the year will focus on congressional
consideration of the Administration's request for substantial military and
humanitarian assistance to the contras. The Sandiniras and Cubans will
take a variety of initiatives calculated to strengelp congressional and
public opposition to the request. Managua, for example, will indicate
readiness to resume negotiations under Contadora auspices after the six-month
suspension ends in May, and Castro will reaffirm his willingness to withdraw
Cuban military advisers fram Nicaragua if the US accepts Sandinista terms
for an agreement. The Sandinistas will also offer cosmetic concessions to
two small opposition parties, make other gestures toward "pluralism," and
relax some emergency decree restrictions. But they will not agree to begin
talks with the United Nicaraguan Opposition under any circumstances, and they
will count on tacit Latin American support for rejecting Administration
requirements on this issue. The Sandinistas, moreover, will continue to
insist that a formal US agreement to halt all assistance to the contras and
other forms of "interference" is an essential precondition for a regional
peace accord.
33. If Congress approves the Administration's request to resume military
assistance to the FDN, the Sandinistas, backed by Cuba and the USSR, will
attempt to turn Latin American opinion against the US by raising noisy
allegations that this represents only the first phase of a plan for direct
military intervention in Nicaragua. If the request if rejected, the Sandinistas
will interpret this as the beginning of the end of the-FDN's Challenge. By
mid-year they will intensify military and subversive pressures to force
Honduras to deny sanctuary to the contras.
34. Regardless of the outcome of the debate in Washington over Central
America policy, the Sandinistas will continue to play a waiting game. The
recent request by eight Latin American foreign ministers that the Administration
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halt aid to the contras and renew the dialogue with Managua will reinforce
Sandinista confidence that time and prevailing political trends in Latin
America will work :to their advantage in the next year or two. The Sandinistas
will rely on political warfare maneuvers rather than negotiations, and they
will remain deeply skeptical that the Contadora process will yield an
acceptable agreement. The next 12 months will not bring the Nicaraguans to
modify their basic assumption, namely, that their Central American neighbors
will be ready to come to terms -through bilateral negotiations only after
the FDN is reduced to a managetible nuisance along the thinly populated
northern border,
35. The Soviets and Cubans will continue to urge the Sandinistas to
avoid blatant provocations that would play into the AdMinistration's hands.
The Gorbachev leadership will regularly voice support for Nicaragua's
independence and sovereignty and the Soviets and Cubans will provide
sufficient petroleum, industrial machinery, and consumer goods to avert a
collapse of the economy. Neither Moscow nor Havana, however, will deliver
advanced weapons such as MIG-21s or MIG-23s, or SA-2/SA-3 surface to air
missiles this year. Bloc military assistance will continue to be confined
to helicopters, infantry weapons, and support materiel such as trucks,
jeeps, spare parts and other non-lethal equipment. The Soviets and Cubans
will go on training Nicaraguan air-defense forces, and they may provide
self-propelled anti-aircraft guns this year, but they will not cross the
crucial threshold of introducing jet fighters or SAMs.
36. In El Salvador the uneasy truce between Duarte's Christian
Democrats and senior military leaders will be tested more severely this
year than ever before in the last three years. Support in the officer corps
for Duarte has declined in the past six months, and there Will be growing
tensions and recriminations over economic policy and management, military
assignments, and cabinet Changes. If Duarte aggressively pursues his US-
supported economic stabilization program, his political standing will be
progressively impaired among most sectors of the population, and this will
deepen the high command's dissatisfaction with his leadership.
37. In sum, the political climate will be ripe for a potentially
destabilizing test of strength toward the end of the year. A major misstep
by Duarte could precipitate his overthrow with no advance warning. The
decline in the FMLN insurgents' military capabilities will limit the threat
to terrorist spectaculars in San Salvador and other urban centers, including
assassdifiation attempts against Salvadoran political and military figures
and US .personnel. One of the most volatile issues this year will be Duarte's
reaction to probes by nonCommunist members of the FMLN of prospects for
reentering the political mainstream. Social Democratic groups led by
Guillermo Ungo and RUben Zamora will be more active in exploring a possible
political accommodation. If Duarte and his political lieutenants appear to
be responding favorably, the chances of a violent reaction by hard-liners in
the military will increase sharply.
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38,. Panama's chronic economic problems will grow more unmanageable,
increasing the likelihood of a political upheaval this year. Having ousted
President Barletta last SepteMber, Defense Chief Noriega is now stuck with
an already discredited Delvalle government. Noriega may remove Delvalle in
the next six months and assume the presidency himself, or became-head of a
military-civilian junta. There will be same chance that Noriega will attempt
to reinforce his authority and silence critics in the Defense Forces by
blaming the US for the country's problems, particularly the Administration's
policy of withholding economic assistance until Panama establishes a coherent
economic program.
South America
39. Aside from the ddbt problems of the major South American countries,
Chile will present the greatest potential for a political breakpoint this year.
The main imponderable will be the capacity of more than a dozen non,-Communist
opposition parties and labor leaders to organize a credible threat of a
national strike this summer as a means to force General Pinochet to negotiate
a transitiOn to civilian rule based on principles contained in the national
accord signed by eleven parties last August. The opposition's principal aim
will be to deepen cleavages among the service commanders who form the ruling
junta. Air Force Gen. Matthei's advocacy last last year of a dialogue with
the opposition prompted a' threat from Pinochet to dismiss him and the national
police chief if they persisted in opposing his political policies. The Army
representative on the junta was forced into early retirement last November
and the Navy commander is thought to oppose Pinochet's plan to stay in power
after 1989, when Chileans are scheduled to vote on a single presidential
candidate to be nominated by the junta.
40. If the opposition succeeds in staging protests leading to a general
strike, there will be an even Chance that PinoChet's intransigence will
precipitate an open split in the junta and armed forces. The political atmosphere
will become much more volatile: after the summer vacation period ends in March.
Pinochet is confident that the divided opposition can be intimidated without
risking a major breakdown in public order. His disdain for "pseudopoliticians"
and his successful repression of strikes and leftist violence in 1983 and
1984 will lead him to underestimate the strength of public demands this
year for a return to civilian rule. Gen. Matthei and other junta members
believe Pinochet "committed large mistakes" last year by refusing to negotiate.
The next 12 months will witness events that may provide a definitive judgment
on these conflicting assessments of the stakes in Chile.
Southern Africa
41. In South Africa the coming year will be marked by escalating black
attacks on white businesses and residential communities. The capacity of
government security forces to maintain order in black townships and, at the
same time, protect white areas will be stretched thin. The government will
be obliged to deploy regular military personnel in substantial numbers.
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The aggressiveness of militant black youths who are not associated with or
controlled by the major black organizations will become the principal
threat to white security and authority. This threat will far exceed that
of the ANC's military arm, wh ich will not be able to mount any significant
expansion of guerrilla activities from bases in neighboring Front Line states.
The ANC, however, will succeed in staging sporadic attacks on key economic
facilities such as the petroleum refinery in Transvaal. The ANC this year
will concentrate on building long-term assets for waging a "people's war,"
particularly the organization and expansion of small military cells.
42. The federation of 34 black labor unions formed late last year
will become much more politicized. Its president has warned, for example,
that if the government does not abolish laws that require blacks to carry
pAsses, "we will take all the passes of the black people and burn them."
The federation and other major black organizations will combine to sponsor
demonstrations including boycotts of black schools and white businesses.
The boycotts may be called in the next three months if the government rejects
demands for the unconditional release of Nelson Mandela and other ANC
leaders and the lifting of the state of emergency imposed last July.
43. There is a 40 percent chance that escalating violence against the
white minority will produce a severe crisis of confidence in President Botha's
leadership before the end of the year. The accelerated drift toward open
race war will strengthen the influence of hawks and maximalists in the
National Party and government. If a genuine crisis of confidence emerges,
there will be a 30 percent chance that Botha will repudiate his strategy of
limited and ambiguous reforms, call a snap election, and resign from office
before year's end.
44. In Angola, the prospect of US military assistance to UNITA will not
cause the dos Santos government to establish a timetable for the withdrawal
of Cuban troops. The Angolans will react by suspending further negotiations
on Namibia and by shifting to a more hostile stance linking the US with
South Africa's regional interests. Castro will increase Cuban support to
Angola, as well as to the ANC and SWAPO, and seek to place himself at the
head of a movement for greater unity among the Frontline States in confronting
the US and South Africa. The Soviets will expand military and economic
assistance to Angola and reinforce their advisory presence in the country.
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