JPRS ID: 10360 WEST EUROPE REPORT

• Document Type: CREST
• Collection: JPRS
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00850R000500040006-6
• Release Decision: RIF
• Original Classification: U
• Document Page Count: 36
• Document Creation Date: November 1, 2016
• Sequence Number: 6
• Content Type: REPORTS

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500044446-6
FOR OFFICIAL USE ONLY
- JPRS L/ 10360
3 ~March 1982
West E u ro e R e o rt
p p
- CFOUO 13/82)
- FB~$ FCyREIGN BROADCAST INFORMATION SERVICE
FOR OFFICIAL tJSE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6
NOTE ,
- JPRS publications contain information primarily from foreign
newspapers, periodicals and books, but also from news agency
transmissions and broadcasts. Materials from foreign-language
sources are translated; those from English-language sources
_ are transcribed or reprinted, with the original phrasing and
other characteristics retained. '
Hea3lines, editorial reports, and material enclosed in brackets
are supplied by JPRS. Processing indicators such as [Text]
or [Excerpt] in the first line of each item, or following the
_ last line of a brief, indicate how the original informat ion was
processed. Where no processing indicator is given, the infor-
mat~on was summarized or extracted.
Unfamiliar namzs rendered phonetically or transliterated are
enclosed in parentheses. Words or names preceded t~ a ques-
tion mark and enclosed in parentheses were not clear in the
original but have been supplied as appropriate in context.
- Other unattributed parenthetical notes within the body of an
item originate with the source. Times within ~.tems are as
given by source.
The contents oi this publication in no way represent the poli-
c ies, views or at.tit~udes of the U. S. Government .
- COPYRIGHT LAWS AND REGULATIONS GOVERNING OWNERSHIP OF
- MATERIALS REPRODUCED HEREIN REQUIRE THAT DISSEMINATION
OF THIS PUBLICATION BE RESTRICTED FOR OFFICIAL USE ONLY.
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-04850R000500040006-6
FOR OFFICIAL USE ONLY
JPRS L/10360
_ 3 March 1982
WEST EUROPE REPORT
(FOUO 13/82)
CONTENTS
TI~ATER FORCES
FEDERAL REPUB~IC OF GERM~,I~TY
First Flight Tes~ of MBB Solid-Propell~nt Rarn~ et
(AIR ET COSMOS, 28 Nov 81) 1
ENERGY ECONOMICS
- ITALY
Grandi Intervie~wed on Eni's Str;~tegy
(Alberto Grandi Interview; ENERGIA, Dec 81) 2
YOLITICAL
NETHERLANDE ~
Dissension, Internal Probl:ems of Labor Party �
(Feike Salverda, et ~~1.; VRIJ NEDERLAND, 23 Jan 82) 17
N'SLITARY
FRANCE
Defense Budget for 1982 Outlined: Air Force Seen Lacking Funds
(AIR ET COSMOS, 21 Nov 81) 22
Defenae Ministry Views Four Options in Air Detection System
(AIR ET COSMOS, 28 Nov, 5 Dec 81) 27
- Helicopter Division Chief Discusses Trends, Production, R& D
(Jacques Morisset; AIR ET COSMOS, 19 Dec 81) '9
- a- [ III - WE - 150 FOUO]

, ~ FOR OF'FICIAL ~1SE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6
FOR OFFICIAL USE ONLY
THEATER FORCES . FEDERAL REPUBLIC OF GERMANY
FIRST FLIGHT TEST OF MBB SOLID-PROPELLANT RAMJET �
Paris AIR ET COSMOS in French 28 Nov 81 p 44 ~ .
~Article by P.L.: "Fi~st Flight Tests of MBB F~toron-Fueled Solid-Propellant Ramje~']
' ~Text~ The MBB ~Messerschmitt-Bolkow-Blohm1 company (FRG) has just successfully
completed the fi~st two �lights tests of its new boron-fueled solid-propellant
ramjet, the development of.which has been under way for the last 3 years uraer an
E'RG Defense Ministry contract. The tests were carried out in Sardinia (Italy),
using a dummy missile with a tE~st~model of MBB's solid-propellant ramjet as its
cruise vehicle and the �irst stage of an American "Honest John" miasil~ as a
boc~ster. ~ These tests were designed to test only the operation of thp boron-�ueled
solid-propellant ramjet. The experimental missile was therefore equipped with a
telemetry link and with a guidance and piloting system consisting of a strapped-
d,own inertial navigation equipmen~ and computer. According to MBB,'the perfor-
mance~of the ramjet fulfilled all expectations, even at attack angles greater
than 6 degrees.
This baron-fueled solid propellant ramjet is designed for next-generation tactical
missiles like the new ANS supersonic an~iship mi~sile developed joint}.y by
AEROSPATIALE ~National Industrial Aerospace Company/ and 1~B under a cooperative .
- Franco-German project. It is presently considerea the preferred solution for
the main ANS delivery vehicle. But the builders of the ~?NS actually have a
choice between a solid-propellant ramjet (the I~BB one) and a liguid-propellant
ramjet (derived from that of the French tactical nucl~ar ASMP /Air-to=Ground
, Medium Range Missil~~. The final~choice is due to be made ~n 1984, at the con-
- clusion of development work anc7 flight tests on the two types of ramjets, to be
carried out between now and then in FranGe and the FRG. �
" COP~RIGHT: A. & C. 1981 ~ ~
. 9238
- CSO: 8119/0692A � .
1
= FOR OFFICIAL USE ON~.3l
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6
; FOR OFFICIAL USE ONLY
i
ENERGY ECONOMICS ITALY
GRANDI INTERVIEWE?~ ON ENI'S STRATEGY
Rome ENERGIA in Italian Dec 81 pp 16-27
~ [Interview with Alberto Grandi, president of the National Hydrocarbor.s Agency,

~ by Romano Prodi, in Rome, November 1981]
- [Text) [Question] Can you preseret briefly the strategic lines along which ENI
[National Hydrocarbons Agency] is moving snd the ways in which this strategy is
tending to be formulated?
[Answer] Various motives, deGisions and restr ictions are canfluent~ in:the strategy
_ of a special structure like the structur.e of an enterprise witK state participation.
Alongsi3e the statutory tasks, we have government decisions and guidelines, expressed
in laws, resolutions, authoriz~.tions. We have ob~ective behavior restrictions.
First of all, there are the ones stemming �rom the greater responaibilities and
- require�,r,ents of a social nature with which we are inevitably charged. We are think-� ,
ing of the sub~ect of supplying methane in the South, which certainly a private
- company would not accompiish, at least in the dimensions established in government
- headquarters.
' This does not mean that the strategy is "given" to us, but we certainly have a
degree of freedom that is smaller than the degree of freedom of a private enter-
_ prise, especia~ly in the choice of field toward which to direct our activity.
It suffices to mentifln the obligations of the former EGAM [Agency for the Management
_ of ~iinera]. and Metallurgical Concerns] companies, and, more recently, o.f the SIR
[Italian Resins Company] and the Liquichimica Company, and, in a certain way, of
_ the Monti Group, delegated to ENI, in order to point out the most important restric-
- tions.
ENI's strategic plan, however, does not waste time on the determination znd quanti-
fication of sectoral objectives and on singling out priorities in ~rograming in-
vestments, but, rather, it is characterized especially by the industrial poclicies
that it assumes, by the ways in which it intends to pursue the previously selected
objectives. It is up to us to act so that an operation that m~ght be taken
as one of inere salvage is incorporated in a framework that wi].1 have its own eco-
- nomic validity and that can thus be turned into a positive act.
i
- From the point of view of priorities, actions undertaken in the field of energy
(to increase the degree of autonomy and rQliability of supplies and to contribute
2
- FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6
FOR OFFICIAL USE ONLY
to a change in the energy system) and actions for improving the publicly owned
chemical industry. ~
With regard to industrial policies, the basic motives consist of the following:
[a.] Internationalization: this is an approach pursued, with appropriate initia-
tives, ~n the wh~le range of the Group's operations, for individual industrial
activities and for financial activities. It should be pointed out thaC the solution
of the p-oblem of the basic chemical industry is being sought, for the first time
and in a radicaT manner, on an international sca]:e.
[b.] Stimulus and reorganization of scientific research activities and activities
for innovation, with a trend toward interventions in the energy and chemical sec-
_ tors, specific forms of urganization of research in high risk areas, joint ventures
with international operators.
[c.] Adoption of strict criteria for ensuring inuestment quality both for the
- reconversion processes and for new investments.
[d.] Trend toward measut~s and interventions to ensure the necessary shift of the
prevailing "orientation toward production," characteristic at present of large
activity sectors of the group (chemical and textile industries), to an effective
"market orientation." ~
- [e.] Pursuit of a more balanced relation in the: financial structure between own
means and overall coverage, with the possibility of acquiring fresh money not only
through the state, but also through access to the national and international stock
markets.
Although these are intervention and method priorities with which we intend to move,
it is also true that there are other serious problems to which great attention
must be paid, Iike improvement of the textile sector and of the former EGAM com-
_ p anies. The important point is to avoid occurrence of what happen~d in the textile
sector where, for example, the improvement of Lanerossi, which was achieved in
_ the 1960's, was later suffocated by the acquisition of other enterpises imposed
_ on us--like Monti, Fossati, Cotoniere Meridionali--with resultant huge ~osses.
With SAMIM, for example, the 577 billion lire that the state had granted to ENI
as endowment fund were almost wholly. absorbed by covering the losses generated
by the inherited production structure.
_ [Question] In a few words, ENI feels that being a public enterprise is constantly
- more burdensome, with a whole series of impositions that a private structure does
not have to undergo.
[Answer] What we are trying to do in the various sectors of the Group is to acquire
private partners precisely for the purpose of pstting ourselves in a logic that
will be tied as much as possible to an industrial management rather than to a purely
social point of view, wlth all the problems that this kind of position entails.
[QuestionJ How is the need for a long-term strategy--often, as you have said,
"imposed" on ENI from the outside--reconciled with the discontinuity of the pol.itical
authority characteristic of the Italian situation?
3
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6
_ FOR OFFICIAL USE ONLY
[Answer] The government's continuity represents an indispensable requirement.
In my opinion, the lack of it is one of the main sources of problems f6r the PPSS
[StaCe Participations] system. And that ~is not only with regard to the aspects
of a strategic nature, but also because of the possibility for the shareholder--the
state--to ascertain the validity of the management that it has placed to guide
the enterprises. At present, the manageu~,ent has a series of formidable alibis
precisely owing to the fact that the~~pe:sons with whom it speaks change constantly.
- I have been in ENI for a year and a half now and I have already seen three energy
plans. Under these circumstances, it is impossible to have stable, precise direc-
tives. Too often we are faced with program drafts that vary as the ministers vary.
The idea of extending the term of office of the presidents of state participation
agencies seems to me one that can be shared, but it would require-�in order not
to prove to be useful solely for internal organizational purposes--a continuity
of presence in the government structure. It is possible to determine the specific
responsibilities for a failure to attain the~ob~ecCives only with stability of
the persons with whom we deal.
[Question] ENI's strategy--regardless of how it has been forming--has been confined
within very precise limits, judging from all that you have said so far. The first
point is the lack of clarity or, rather, the vagueness of the ob~ectives that the
agency must pursue, as is shown by the experience with the energy plans. The second
point is the risk of constant interferance from outside the agency, which, every
time, diverts huge funds from the primary objectives to which the agency's activity
should have devoted itself. The third obstacle is the "discontinuity" of the outside
authorities to which the agency should report on its own operations. In view of
the fact that it will be difficult for these obstacles to disappear in the aear
future, how do you believe that the achievement of a strategy of constant produc-
tion diversification is compatible with so restricted and tortuous a maneuvering
area? Voluntarily or not, in the last few years, ENI has in fact expanded the range
of its activities impressively, both in the sectors in which it was traditionally
involved (like the energy sector) and with regard to new cectors. This strategy
is exactly the opposite of the strategy of the lar~est international energy enter-
prises, which, with considerably more resources than ENl,have preferred to aim
a production and marketing specialization, abandoning less important seCr.ors and
less advantageous markets.
[Answer] Precisely tor the motives that I mentioned,to you first, in many cases
the course of diversification was imposed on the agency. A typical example is
the example of the textile sector in which we are now pursuing a line of disin-
volvement, at least. Another example is the example of the mineral-metall.urgical
sector. This sector came to ENI as a result of the dissolution of EGAM. The ac-
tivities thus taken over were and are cansiderably passive. The only possibility
far d.~nprovement lies in a vast program of internationalization of the se~tor, with
the resultant readiness of the public shareholder to co~it trillions of lire to
it. Therefore, it is up to the government to decide if it is in favor of th~.~~:.
kind of operation, causing SAMIM to come out nf a situation that is compellin~ it,
at present, to aperate only on national mines that may, perhaps, have strategic
importance, but certainly no economic importance. In this assumption, I wonder
if it is not worth while to set up an ad hoc structure, with f inancing adequate
- for the task and a management not distracted by other important duties. The white
book of the Ministry cf PPSS itself pointed out the need for incorporating the
activity of aluminum, zinc, lead and other nonfe~rous metals in one single agency.
4
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6
NVK UNI'1l.lAL t~JC. U1rLi
At any rate, I should like to p.oint out-~ahen an "excess'.' of diversification is
mentioned--how, even in the most recent LrNI programs, a very high share of invest-
~ ments (85 percent) is always concentrated in the energy sector and auxillary activi-
~ ties.
[Question] And what about diversiffcation in'the field of the energy sector?
[Answer] In this case, too, diversification initiatives res~ult at times from autside
pressures. We would certainly not have thought of expanding our activity also
into the coal ~ector, if we had not been told to do so. If Che shareholder has
- chosen to put us in this ~ield, this decision must, therefore, be supported by
logically consistent behavior. The same can be said~of the ~c~il aector in which
we entered, recently, in the Mediterranean (former Monti Group) "venture." This
dscision may have its economic validity, but it f alls:~into a trend that certainly
is not to be exaggerated. On ~he day when ENI should be.obliged to guarantee 60
to 70 percent of the country's oil requirements, at that point it should be wondered
whether the entire nationalization of the sector is not preferable. The requirement
" for maintaining a diversification of operators seems, on the other hand, to be
definitely indispensable, because it makes it possible not only to ascertain the
economic quality of the ~peration of the state agency,,but also to ensure greater
reliability in the country's energy supplies. In short, attention must be paid
to the fact that ENI does not have to extand its own market-share excessively.
J That would not be in the country's 3.nterest. Moreover, ttne government has, within
the field of a price policy that protects the interests of the oil companies, the .
instruments needed for requiring those same companies not to abandon the market
in times of depression (it suffices to poinL out how the concessionary system oper-
ates in the~oil market). Otherwise, the matter of "institutional" aupplies by
- ENI ends by harming the state. In fact, when the domestic market makes economically
valid results possible, the state agency's share decreases, while in the opposite
_ situation it increases excessively, as is happening at the present time, when we
are supplying over 60 percent of the nation's oil requirements. '
- [Question] Moreover, the Monti case represented a dangerous precedent in the oil
sector with the risk that ~i;andonment of our market by other operators will finally
- find expression in a further forced expansion of ENI's share.
~ [Answ~er] Precisely in.order to reduce ENI's presence, in terms of quantity, on
the domestic oil market, we are seeking to proceed with operations lik,e the one
concluded with Occidental in the chemical industry. In other words, to call for~ign
, operators back into Italy to meet the oil aupply requirements..
[Question] Maliciously, it may be said that the "foreign draft" can also be used
to hold out against "domestic" obstacles.
[Answer] I should say that this is true.
- [Question] In a logic of better allocation of the Group's resources, how do you
- ,justify ENI's remaining in the nuclear sector, where very high losses are being
recorded, where the future csrteinly~d,~~s ~x appear to be better and where there
_ no longer is t:hat concern of the 1960's for ensuring reliability of fuel supplies,
which gave rise to ENI's entrance in the nuclear field?
5
a FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R400540040006-6
FGR OFF[CIAL USE ONLY
[AnswerJ The Group's crisis in the nuclear sector is caused by the incredible
diversity of the programs decided on in their time and the construction of nucleo-
electric powerplants. That is to say that it is caused by national programing
in this sector. The present difficulties of A~IP [National Italian Oil Company]
Nuclear stem from having taken on commitments--by specific, official government
directive--with regard to programs that later turned out to be unrealistic. The
situation would certainly not have been different, if an organization different
from ENI had been carrying out the initi.atives for nuclear fuel supply. Several
times, we pointed out the need for coping with problems stemming from this by means
of appropriate coordination action with ENEL [National Electric Power AgencyJ.
Every solution can be taken into account in this framework and on the basis of
a point of view that is not business-oriented, but, rather, that is to the greater
advantage of the nation. The problem raised at this point is who pays for that
mistake in programing. In 1992-19;`3, the cumulative loss for uranium enrichment
and storage will be on the order ot 8 to 9 trillion lire, including capital and
interest. And this is still assuming that this Energy Plan, which however con-
siderably reduces what was previously approved, will be carried through to ful-
fillment.
[Question] In the light of this sorry experience, now, almost 10 years later,
you are confronted by another programatic directive: all pro~ected toward coal.
In the 1977 Energy Plan almost no mention was made of it and now a consumption
of close to 60 million metric tons is esf.imated by the end of the decade. In other
� words, a situation is being forecast for Italy's coal future not very different
from the situation experience~'~n the nuclear sector and no less risky a situation.
With investment choices that are being started even before the basic aspect of
the "social acceptability" of those same choices has been ascertained. On the
contrary, we are witnessing a race between operators to accelerate presence in
the coal sector with everyone laying claims, in that sector, to inclinations that
are at least questionable.
In this situation of uncertainty and of industrial risk, how does ENI evaluate
the chc,ice of coal? And also, in view of the decision by ENEL--the larger con-
sumer and, therefore, the one with which you deal primarily--to acquire coal directly
and to acquire mining participations on its own, what concrete prospects are there
for ENI in this field?
[Answer] Because it is true that, in view of the way in which things have gone
in the nuclear sector, it is absolutely necessary for our country to ad~ust to
other solutions, including the coal solution. ENI is seeking to move toward this
choice, risking but prudently. Theoretically, next year we shall have tlie possi-
bility of bringing 3.5 million metric tons of coal into Italy. A good part of it,
however, has already been placed on the American market and another part can be
acquired directly for the requirements of our coke plants. Therefore, the pre-
sent availal:i"lities of ENI are no risk from the economic point of view. It is
certainly unthinkable to go to support immediately investments that may ensure
20-30 million metric tons in a period of 4 to 6 years. This amstunt should repre-
sent 50 percent of the agreement provided with ENEL, in accordance with the PEN
(National Energy Plan] forecasts.
i::cently, 'i stated my perplexities in this connection on the advisability of ENEL's
becoming a direct mining operaeor. It is a different matter for ENEL to have re-
liability of supplies and the capability of competing in suppying coal.
6
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2407/02109: CIA-RDP82-00854R000500040006-6
FOR OFFICIAL iJSE ONLY
Therefore, it is a question of setting up, on the one hand, with reference to the
National Energy Plan, an action program by ENI adjusted ta the need for reliability
of supply for the Italian market (and the ENI programs are subject not only to
the government's approval but also to examination by Parliament) and, on the other
hand, it is a question of making possible an independer.t comroercial supply~activity
of ENEL that will enable ENEL to ascertain the advisibility of supplies from AGIP
Coal and that will enable AGIP Coal to compete at all times with the most qualified
international operators. Natu~a~ly, because the requirements for reliability
will lead to ~ commitment by ENI requiring huge mining ~:nvestments, it is natural
that a certain guarantee for placing coal from deposits abroad to which ENI holds
title is necessary. ENI and ENEL have already set up, for this purpose, a Coal
- Committee in which all problems of integration and coordination between the two
agencies pertaining to development of this source will be examined. The committee
should be made up of a series of relationships at a more operational level. It
' seems to me that an orientation like the one that I have set forth here is also
expressed in the latest edition of the Energy Plan.
In short, ENI does not want to take on the role of sole institutional supplier
of ENEL, but, as an international operator in coal, it counts on having ENEL as
- its main customer, certain to succeed in supplying the agency under conditions
- of competition with the other international operators.
[Question] With regard to the chemical industry, ENI has enormously exp9-~ded its presence
to the less attractive primary products that show severe problems of excess pro-
- duction capacity and of intolerable compeCition from "new producers" on the interna-
tional level. With its accounts at-hand,~how can ENI cope with this kind af sirua-
tion? How much acceptance of outside pressures and of informed strategy:is ~here
in ENI's decision?
Can you sumwarize for us, for purposes of this sub~ect, the Cerms of the ENI-OXY
agreement? Can you in particular present the advantages that will be derived by
ENI from the operation?
[Answerj First of all, I state that ENI is not programing new action in the primary
chemical industry, but, rather, it is seeking solutions to existing prablems in
a difficult task of improving activities and initiatives that have gone into a
state of crisis. Absorption of LIQLTICHIMICA and of SIR has given rise, within
' ENI, C~ extremely important organizational problems. In fact, we have to bring
together gersonnel who formerly operated in hot competition. We have to eliminate
plants that are useless duplications. We even have to shift personnel to a plant
that was formerly a competitor, and so on. This commitment was assumed on the
basis of government decisions, as is evident from the legislative contexC in which.
the operatior. i.s incorporated. This is no reason for the evaluation of the "pro-
ject" necessarily to be negative. It would become negative, i~ the solutions adopted
should be influenced by undue pressures, by the prevalence of special interests.
Having said that, there is sti11 the question on the validity of the program, on
the effects on ENI and on the nation's economy of the anticipated initiatives.
The lines of action connected with the establishment and development of the public
"chemical pole" go beyond mere action of rationalization and renovation of the
- primary chemical ind~zstry, and they affect development of the secondary chemical
~ industry, the nutrition sector, pharmaceuticals and parapharmaceuticals, development
� 7
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6
FOR OFFICIAL USE ONLY
of applied research and of innovative research, modernization of the marketing
mechanism, a definite move toward internationalizatian.
This is the framework in which the agreement for the establishment of ENOXY falls.
This company is in 3oint venture between ENI and Occidental Petroleum Corporation.
The agreement was signed definitivel.y in Rome on 29 October 1981. This is not
the o:�ly initiative that ENI intends to carry out along this line in the chemical in-
dustry. This one should be followed by others that will enable us to join up with
internatianal partners in special sectors of the chemical industry.
ENOXY, whose activity should start on 1 January 1982, will be participated in
equally by ENI and Occidental with a corporate capital of $1.05 billion ($525 mil-
lion for the chemical sector and $525 million for coal) and will operate interna-
- tionally.
,
ENOXY, a holding company with headquarters in Holland, will hold 100 percent of
the operational companies represented in Italy by ENOXY Chemical Company, which
will include the petrochemical activities that will be taken oyer from SIR and
ANIC [National Agency for the Hydrogenation of FuelJ (about 60 petrochemical plants)
- and in the United States by ENOXY Coal Incorporated, which wi11 have a complex
of four coal mines.
A third company, ENOXY Management, urith headquarters in Zurich, will preside over
the operations of coordination, organization and decision-making of the operational
companies. This structure's primary objective is to ensure, with the collaboration
of international managers, the resurgence of ENOXY petrochemical on the organiza-
tional, logistic and marketing level, in order to achieve degrees of efficiency
comparable with the most effective compe~itioa and to acquire, therefore, broader
_ and more stable positions on the Italian market and especially on the foreign mar-
ket.
The chemical activities, which are starting from a very passive economic situation
_ owing to considerable industrial and financial problems, will have a financial
structure--by means of the contribution by partners and by the government support
provided in the chemical plan of Minister De Michel.is--that will make it possible
to hofd the burdens down to levels of absolute competitiveness with regard to com-
petition, in order to allow the necessary maneuvering freedom for proceeding with
the industrial improvement of the activities.
Coal activity will be based in every phase--from extraction to transportation and
to marketing--on the support and management of Island Creek, the Occidental Petro-
leinn subsidiary operating in the coal sector and which, in size, is the fourth
largest coal producer in the United States with reserves of 4 billion short tons.
ENOXY Coal, with its four mines and with reserves of about 250 million short tons,
has, at present, a production of 6.8 million tons, expandable, in the short term,
to 10 million tons. I~'3fty percent~of the coal mined will be available to ENl.for
the domestic market and, obviously, for the international market. We also have ~
a berth available at Baltimore that provides access for ships up to 150,000 tons
dead weight, making it possible, therefore, to ~educe dem~rrage charges.,~-now:~se~ry
high in�the Unite3 States.~by 30 percent.
In particular with regard to chemical activities, ENOXY's ob~ective is to set up
an international group with a size comparable with the largest European groups
8
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007102/09: CIA-RDP82-00850R000500040006-6
FOR OFFICIAL USE ONLY
" in the field of previously selected activity sectors. The production capacity
of ethylene is around 1 million.metric tons, one of the largest in Europe. The
- objective is to achieve a turnover of around $6 tol$7 billion by 1986-1987. This
objective should be attained by operating along the following lines:
1. By assuming p.rominent positions, in Europe,~in important sectors of the petro-
chemical industry, especially in the large monomers (ethylene, propylene, vinyl
chloride, butadiene, and so on) and in the principal plastic s~ubstances (low-density
polyethylene and linear polyet~hylene, polyvinyl chloride, polystyrene) with European
shares of 8 to 10 percent for the principal products.
2. By being present on the latex and synthetic rubber market with sizable shares
(15 to 20 percent).
3. By increasing the production capacity of some plants in Italy and by proceeding,
subsequently, with a~rogram of purchases in other European countries, in order
to expand the production and marketing base.
ENOXY will have a production structure closely integrated with raw materials prn-
vided Uy the par~nt corporations at competitive costs. The production lines will
be rationalized. Technologies will be updated rapidly and the plants will be de-

~ veloped in their production capacity (also by completing some plants in Sardinia
whose construction work has been interrupted for some time now).
In the area of f ixed costs, ENOXY wi11 minimize general expenditures and the cost
of labor by setting up an operational structure and a very flexible, effici~:nt
headquarters, comparable with the structure and headquarCers of European competi-
tors.
[Question] Coming to the critical problem of oil supplies, what scenario do you
anticipate in the short term (1981-1982) and in the medium term (1985-1990) on
the international market?
[AnswerJ The framework in which the problem of oil supplies is located is full
of uncertainties, distorsions and risks, not only in the medium term but also in
the short term.
The sizable decrease in oil consumption by the i.ndustrialized countries seems to
be a factor of relative stability, but here too how much does the situational com-
ponent come into play?
~
A stabilization factor, at least in the short term, seems to be represented by
the oil policy of Saudi Arabia, which is giving evidence of great responsibility
with regard to the international community (for example, the "war relief " supplies
in the period of interruption of Iraqi and Iranian supplies) and it has pursued,
with some degree of success, a policy of unification and modernization of prices,
of their indexing on souiid bases. But what data have we for knowing if and when
one of the many factors of uncertainty weighing heavily on the world oil system
(the future of Egypt after Sadat, the Palentinian issue, the Afghan issue., the
development of the Iran-Iraq war or some other new trouble spot} will succe~d in up-
setting this moderate, balanced line that seems to be prevailing at present? The
9
_ FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2407/02/09: CIA-RDP82-00850R000500440006-6
. FOR OFFICIAL USE ONLY '
~ only sure fact is the uncertainty, the vulnerability of the system. Are we in
a phase of adjustment and of rebalancing or merelq in the rest period on a diffi-
cult ~ourney?
- We only know that difficulties, in terms of availability and prices, ma.y come up~
at any time, and we must take that into account in our policies and in our programs.
[Question] How does ENI believe that it can adequately balance the traditional
rlichotomy reliability-burdensome cost of supplies?
[Answer] I do not believe that ensuring conditions of reliability entails necessarily
an increase in the burden of supply, except, obviously, when it is a question of
' carrying out specific technical operations in terms of reliability, like organiza-
tion of strategic stocks rep~esenting a specific cost of reliability. It can happen,
~ as has happened historically, that the preparation of ineasures taken with regard
_ to reliability, like, for ~example, the formation of stable, continuing relations,
stipulation of long-term contracts, will give rise, under certain market conditions,
to rigidity and burdens with regard to a more "commercial" method of operatin~.
It must not be overlooked, however, that, in different market situations, relia-
bility also becomes an advantage. To give an example, if in the period of crude
"shortage" (1979), ENI had wanted and had been able to give up part of its own
increased supplies on the spot market where crude oil had exceeded $40 a barrel
(compared with official prices of $24 to $27), it would have made huge profits,�
in spite of its withdrawing crude oil to a considerable degree from areas with
the highest price level. The real problem is that, at certain sizes and when a
specific role is played, as in the case of EDTI, the criterion of reliability is
an inevitable component within its own method of operating. With regard to the
problem of "balancing" criteria of reliability with the pursuit of conditions of
- economy, the strategy of the ENI Group aims primarily at optimization of the crude
oil pool,.at attainment of greater industrial and marketing flxibility and at an
increase in the degree of internationalization.
[Question] In recent years, ENt k~as shown several times a"remoteness" with regard
to the market. "Short" in.crud2 when demand was high, as it was in 1978-1979,�
and forced to resort to the spot market witih highers costs and, on the other hand,
"long" in crude oil when situations of depression in demand occurred, as at present,
_ tirlth equally higher than average costs. Does it not seem to you that all this
ends by revealing scant operational flexibility in ENI and disturbing symptoms
of stiffening of the decision-making processes? In a market that would require,
on the other hand, constant adj~ustments and timely responses?
[Answer] Precisely in 1978-1979, EDTI saw the largest increase in its supplies
of crude oil, without resorting to the spot market. In that period, imports in-
creased by about 10 million metric tons, compensating for the reduction in indepen-
dent operators. The risk of a large deficit in the country's supplies, urgently
made plain by the government authorities at the end of 1979, drove ENI to conclude
- contracts at any cost. Still at the end of last year, the situation of ENI's crude
was very precarious. There was a real risk of a shortage created as a result
of operations and situations before I came into ENI. The w�ar between Iran and
Iraq had taken.away from us l0 million metric tons that we normally drew from Iraq.
_ We could not buy from Kuwait owing to circumstances Gonnect~d witii the controver-
sies between Kuwait and the Monti Group and between Kuwait and SARDOIL.
10
FOR OFFICIAL USE ONi,Y
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6
EOR OFFIC[AL USE ONLY
Therefore, we acted tu cope with this crisis situation. Suddenly,. however, things
began to change.
First, Saudi Arabia replaced the Iraqi in selling crude to us.. Then, before any
reasonable forecast, Iraq resumed supplies at the rate of 150,000 barrels a day.
There were also possibiZities.of buying �rom Kuwait. Iran reswned supplies, making
about 100,000 barrels a day available. Concerning a program for withdrawals of
crude for 1981, which ENI indicated at the beginning of the year at 47 million
metric tons, the May 1981 forecasts rose to 53 million tons. In view of the modi-
_ fications that had occurr2d on the market owing to lower constun~tion thus we came
around to assuming a surplus (availability-requirements) of around 8 million tons.
- The Group's response capability, ho~ever, was not lacking. By means of a policy
of reduction of withdrawals of inere expensive crude, in June the surplus forecasts
had been reduced from 8 to 6.6 million tons. In September, to 1.5 million and
in October, around 0.5 million tons. At the szme time, the price went down from
an average of $37.50 a barrel FOB in the first half-qear to around $34 a barrel,
a price that is substantially at the average ot the other companies, taking into
account legitimate differences in quality.
The signif icance of the concept of surplus ahould be explained at any rate. If
AGIP should again have to meet unforeseen requirements on its own market, because
of the withdrawal of other operators as has happened in the past, it would be es-
sential for it to have, at all times, the possibility of increasing the amount
of available crude in a short time. '
Therefore, a supply surplus musC nat be regarded as an esceptional conditionn
but rather~a necessary one. That raises, however, the problem of how to find an
inexpensive method, but rather one capable of yielding profits, of maintaining
those amounts of crude that we might regard as a reserve of the company. For this
_ purpose, AGIP is actively conducting research activities on variaus markets on
which to sell crude with the intention of opening up outlets in remunerative markets
~ from which it will be possible to withdraw~.at the time when the Italian market
has an urgent need for reasons of quantity and quality.
Therefore, the activities directed toward reducing the surplus tihat was shaping
up during 1981 are also viewed ~rom~�the aspect of actions directed toward increasing
the flexibility of crude supply and, therefore,.toward coping better with the re-
curring surplus crises showing up on the international crude market.
[Question] ENI's full support of the arguments, advocated up to now by the private
. companies, in favor of a process of gradual liberalization of our market, especially
with regard to price establishment policies, has given rise to some interest and
to-do. Can you summar�ize your position on this sub~.ect? ~ .
[Answer] ENI's position with regard to oil prices is a position of transition
- from a system of administered prices to a system of supervised prices. This po-
sition stems from a careful, deliberate evaluation of the effects that the methods
of operation of the mechanism for dptermining prices have had on the nation's oil
system. It is not merely a question of losses, serious however, that the delay
in price adjustments has brought about, but also and especially of the distorting
effects produced on the market as a result of the artificial price level maintained
on the domestic market.
].7.
~ � FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2407/02/09: CIA-RDP82-00850R000500440006-6
FOR OFFICIAL USE ONLY
These effects can be summarized, by simplifying, in a situation of instability
of the market, owing to flights especially by smaller operators~ ir.~ periods of
reduced suitability, with negaCive repercussions for the ENI Group, which not only
has to make up supply shortages in those periods precisely when this is most bur-
densome, but it is also thus subjected to artificial pressures and to constant
_ variations in market quotations themselves.
[Question] Two objections that can be m~,de to liberalization of the market are:
a. How can ENI maintain a"controlling" function of price t~nsions: when it has
higher product~on costs than the other enterprises?
b. On the other hand, how could ENI support competition by the other operators
favored by lower costs? Would not ENI run the risk of being restricted to the
less attractive market segments (fuel oil) and excluded from gasoline and gas oils?
[Answer] The assumption that ENI is "structurally" in a situation of inferiority
with regard to the other operators in the oil cycle is unrealistic. If this were
so, we would not ask for a transition to a system of price supervision. At any
rate, it is true that up to the middle of 1981 ENI recorded an average cost of
$37.~50 a barrel FOB far supplies, a price higher than the average on the domestic
market, amounting to $36 a barrel FOB.
This difference was due to the greater presence of Saudi Arabian crude at official
- prices and of spot crudes in the pool of the other suppliers.
In order to cope with t:iis kind of situation, we adopted "hard" policy with regard
to the more expensive crudes. At present, we are not withdrawing crudes from
. Libya and we have cut off purchases of more expensive crudes.
Precisely in view of a more pronounced competitive position of ENI, actions have
_ been scheduled for optimiztng the oil cycle. They include:
a. Search for a pool as economical as possible and suitable for. the refining and
final market structure of AGIP in Italy and for their evolution.
b. Search for products to incorporate in the oil cycle in connection of optimiza-
tion of the preceding poinfi.
c. Development of a transportation system that will minimize stops and will optimize
runs for the purpose of obtaining the best economic results.
Returning to the matter of domestic prices, I believe that a plurality of operators
is in the country's general interest. Achievement of this objective can be guaran-
teed only if those who operate in Italy have the po~sibility of making a profit,
- even with all the cyclical fluctuations. In view of this, how does the problem
of "supervisi,on" come up with regard to th~ present system of price "administra-
tion"? "Supervision" immediaCely adjuststhe price to the variations in costs, while
"administration'1 always entails.a government decision with all the ~olitical pro-
blems resulting from it. Moreover, supervised price must have very precise limits
of its own. They are established by the situation of prices in the European coun-
tries that are, at present, a reference for establishing administered price levels.
12
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6
_ H'UR Ul~~'1(:IAL U5~ UNLY ,
Who is to ascertair this? In my opinion, the state should.use its "secular arm," '
that is to say EDTI/AGIP, wt~ich should calculate what the averages are for prices
of oil products by referring to European prices.
[Question] Let us go on to analyze some problems inherent in ENI's organizational ;
- structure. i
ENI employs 1,500 persons in central functions. Also, excluding personnel assigned
to many different ministries (about 500 persons)., ENI shows an employcment in the. ~
- ho~ di:~~ compa~sy ~ze.ate~ 'than~ fhe numher of employees in considerably larger multi �
n:~ti.orcal companies.
[Answer] A comparison between different organizations, like the holding company
of a multinational corporation and the holding company of a group with state p~r-
- ticipation does not seem to me entirely acceptable.
There are functions and procedures pertaining to the role of a public agency that
involve the employment of special personnel not found in a private international
_ organization. The obligation of establishing the interface of public administration
structures with a bureaucratic nature causes a certain degree of bureaucratic pro-
liferation also at the level of economic agencies, like ENI. I believe, however,
that the problems should be regarded from a different point of view. Two motives
- and two organizational conceptions have been superimposing themselves on each other
and intertwining with each.other in the history of the agency: what we can call
strong centralization, with the maximum number of functions concentrated in the
holding company, and a more coordinated structure,.w'!.*h increasing room for auto-
- nomy for the operational companies, achieved, however, in forms that are not expli-
cit or institutional and often in uncertain ways. The structure of the holding
- company did not succeed every time in adjusting to these changes in organizational
policy, thus causing a gradual increase in personnel. A situation that is not
always clear is derived from this, with sedimentation of organizational structure,,
loss of importance of roles, proliferation of duties, and so on.
The problem, now, is not one of establishing the "cut" to which the personnel are
to be subjected, as it is one of reidentification of areas and functions of the
holding company and of the company, within a strategy for ob3ectives that will
enable the Group to have all the services, first of all activation of tlie strategic
= and operational managerial function, in order to establish the relationship between
volume of competences and professionality and the objectives.
- [Question] Still in connection with personnel, ENI is faced with two very important
problems:
a. The departure from the Group by some very outstanding persons of the second
genetation. I am thinking in particular of Egidio Egidi and Lorenzo Roasio.
b. An appreciable imbalance in the age structure of the executive class, in view
of the i.mportance of the experience factor in managing enterprises in the energy
sector.
To what do you attribute the first phenomenon and how does ENI intend to overcome
- the second?
13
FOR OFFiCIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500044446-6
FOR OFFICIAL USE ONLY
[Answer] With regard to the first point, obviously avoiding an attempt to interpret
~ personal evaluations that were th~ basis for specific decisions, it seems to me
that the subject should be broii~ht to a more general level than the levei of anal-
ysea of the internal operational conditions of the Group. Constantly more exten-
sively and comprehensively, the management of a public industrial group is obliged
to face up to the impact of an outside reality, of a political reality in the broad-
- est sense,~that affects its terms of operation, its inclinations .and definitely
it.s choices. In this context, departure from the Group can b~ regarded as a response
on the individual level.
Concerning the second point, I should like to point out how change at the top levels
~~f the individual companies has always been rather f.reque~t at the operational
, and managerial level. The situation between a company and a holdin.g company is
- different, especially in the holding company and company administration. In this
case, a pnoblem is involved that stems from the generally too sectoral and special-
ized chardcterization of the executive group of the holding co~pany to which is
added, at present, a certain degree of heaviness of the average age. ,
[Question] In the 1950's and the 1960's, ENI represented a formidable reference
point in the growth and regeneration of the Italian industrial system, representing
an almost unique example of "compactness" of the administrative group and providing
- Italy, along with other state participation enterprises, with a new "lay" tachrio-
cracy, that is to say outside the large industrial families. Both the first and
- the second statement could certainly not be repested taday., The "divisions" within
the Group (between~"peripherals" and "centrals," between executives and top level
of the holding company, between company and company, and so on) prevail over forces
- of unity, raising important questions on the very capability of the Group to respond,
under similar conditions, to the new tasks imposed by the country. Connected with
this problem is the still more critical problem,~on which the first one perhaps
depends, of the relations between ENI and political parties. How far have these
relations "degenerated"? And how could they be properly revived?
[Answer] I am answering the three questions ~ointly, because they are closely
connected and also, in some way, form a conjecture: degeneration of the relations
between institutions, political forces, public economic agencies, dequalification
and division of the administrative group. It is a con~ecture that, naturally,
has firm, varied confirmation factors, but that requires some specifications and
~ differentiations.
The situation of extraordinary "compactness of the executive group," pointed out
in the question, had its origin in special and; iri part, unrepeatable conditions
t}~at should be pointed out:
[a.] The particular time in the history of ENI, a timP characterized by the success
of the initial battle for methane~that offered the basis and the opportunity for
an authentic explosion of initiatives, requiring in turn creation of new organiza-
tional, technical and entrepreneurial instruments, and all that on the basis of
= a small initial nucleus and, therefore, excited over the great opportunities that
were opening up to it.
[b.] The country's general climate, a climate of re~construction, of common convic-
- tion on specific Jalue, of enthusiasm in participating in a great process of indus-
trialization.
_ . 14
' FOR OFFICIAL USF ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6
_ NVK UI'ClI.IAL UJL' UIVLY
~
[c.] The nature of a"challenge" taken on'by the operations of ENI, a challenge
with regard to the industrial potentates, the mythical sevez~ sisters, but also
.private industry, entrenched in rigidly antistatist positions.
- [d.,] Also the situation at that time reduced the impact with the political world
predominantly to a relationship at the top level, in particular between government
and enterprise.
When there is a transition from a phase of prevailing creative drive to a phase
of prevailing operation, spaces close up, frictions--also for objective reasons--
incr~dse, moral tensions are attenuated. From this point of view, I would~not over-
estimate the indicated motives for division. Although there certainly are perverse
- "motives" in them, they are also the result of real difficulties that can find
their solution, or..ly if there is a desire for one and it is known how to seek it.
At present, the country is, just as it was perhaps in the postwar period, confronted
by a new turning point.. What has been achieved is creaking and risks collapsing. ,
- New incentives, new ideas and tHe courage for new entrepreneurial challenges are
needed. And the situation of ENI reflects the country's situation, today ~ust .
as it did at that time.
The Group is emerging from a phase of managerial sluggishness to start of� on new
courses, in energy, in chemistry, pursuing lines of more definite opening out into
the international field, seeking and creating conditions of innovation. In the
face of innovative events--like the agreement with Occidental--�there has not yet
been, both within and outside the Group, that kind of response and support that
we might have expected. . ~
- We have the duty to develop--with renewed attention to the organizational force,
that is to say by seeking ways for a definite resumption of a"team" dialogue and
with a different spirit of participation and consensus--a suitable climate for
a bold, binding program.
In order to be able to operate in this way~y..it is indispensable for the shareholder
to act rapidly to eliminate sit~ations within the Group that end by causing dis-
order and disorientation that are objectively intolerable for the purpose of
- achieving final success.
If we know how to operate in this way, we shall also find an answer to the problem
of the "degeneration" of relations between ENI and public institutions, between
ENI and political parties. It is not a question of closing the doors, but of making ~
distorted interpretations of the nature of those relations constantly less possible.
[Question] In view of the challenges that ENI is called upon to make, it is possible,
therefore, according to you, to reconstruct an agency that has in itself a greater
possib~ility of determining itself its own strategy, of facing up to the outside,
of findirig, through this challenge, a new force of unity?
[Answer] Aside from what may be affected optimisms, the objective is certainly
possible. An effort by everyone is needed, however. It must be realized that
an instrument of wealth like ENI cannot be used for power maneuvers, but only for
operations tied with the creation of wealth. If I must give an optimistic note
15
~ FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2407/02/09: CIA-RDP82-00850R000500440006-6
FOR OFFICIAL USE ONLY
- with regard to everytr.ing pertaining to the future, I shall give it after having
read the Amato report, a report that, although with a need for. suitable revisiozs,
is a very valuable and important doc:ument, if it succeeds in being the point of
re�~rence of the reform of the system o~ state participations.
. Trend of ENI's Instantaneous rJperational Margin in 1981
(situation resulting from the Interministerial Price Co~ittee action
on 30 October 1981 and from the OPEC resolution of 29 October 1981)
FOB cost of Lira/dollar CIF cost of Return on the Operational
imported oil exchange rate imported raw raw material margin
a barrel) material frvm the in- (lire per ton)
_ . (lire per ton) ternational.
~ ~ market (lire
per ton)
Month . (A) (B) (C = B - A)
1980
_ Dec 33.50 930 237,OU0 222,000 -15,000
1981
Jan 37.50 953 271,000 234,000 -37,000
Feb 37.50 1,020 290,000 257,000 -33,000
Mar 37.90 1,037 297,000 257,000 -40,000
Apr 37.90 1,076 310,000 257,000 -53,000
May 37.30 1,141 322,000 273,000 -49,000
Jun 35.80 1,184 321,000 273,000 -48,000
Jul 35.30 1,215 325,000 283,000 -42,000
Aug 35.10 ~ 1,245 330,000 283,000 -47,004
Sep 34.30 1,187 308,000 283,000 -25,000
Oct 33.70 1,180 301,000 283,000 -18,000
Nov* 34.10 1,200 309,000 297,000 ~ -12,000
Dec* 34.10 1,200 309,000 297,000 -12,000
* Estimates.
COPYRIGHT: L'Editrice dell'Automobile LEA-Roma 1980
10,042
CSO: 3104/91
16
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6
FOR OFFICIAL USE ON~.Y
~ PULITI CaL N~THFI~LA~TDS
, U I aiLNST UN ~ INTERNAL PN,OALENIS OF LAIiO~~ PARTY
i
Amsterdam VRIJ PJ~D~RLANll in Dutch 23 ~an 82 pp 1, 2
~rticle p,y correspondents Feike Sa,lvercla, Jeroen Terlinpen and h7ax
v~.n Weezel: "Yanic in the PvdA ~abor Party7"
~ext7 Like Ring William II changed from conser-.
vative to libera,l in 48 hours, biax van den Berg
changed after a weekend o~ deliberation from
ra,dical to realist~
, Lucky for him, he does not stand alone. His
entire Second Chamber group is drawing up the
Ne*a Course: t~,x relief for business men, hi~her
preraiums for employees and benefit recipients.
Unly Jaop den Uyl still keeps up their courage
during t~ie stay in the woods.
The PvdA is receiving therapy.
- ~9.t lon~ last, th~ PvciA Lxeeutive Committee is frightenecl to cieath,
kitness i;he statements at the end of the first retreat weekend. "'1'he
;~~.rt,y is in disorder," "~reat panic prevails." Not the unemployment
fi~*ures, industrial s}iutdosm, ~.nd the treasury de~icits produced ~
~ this fra~ne ofl mind in the oPficir~ls, but the continuing droP in t;lle
_ polls. `rhe electora,te threatens to shrink 30 l~ercont in a,year's
_ time, members ~~allc out manthly in group~ of five hundred.
:~~'e~~ n~Lrty leaders over:look the political consequences of the ~T~gner
Committee report on industr,y, or the economy proposals and. p~.rt time
s tudies o:f tor offici~,ls. A] 1 tYie sharper before their eyes ftire the
- a,nc~,l}~ses o~ .the Pvc]A ch.ief i'or market researcli, I{ees Bocle, fra,mer of
ttie niel.ociiously titted, but, moreover, not very encourn~;ing rel~orts
such tLS "'1'he :Uull Inconvenience" ~nd "The Crre~.t Journey"--~.ccord.in~
t~ I)' 6G ~emocrs~,ts ' G67 well understandable by the PvdA.
'rlie l''v~iA Lxecutive Committee has ~,li~eady le~,rned one lesson from the
Jan '1'er.lo~iw club; it i~ concerned about image Projection, not aUout
~
17
FOR OFFIC[AL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED F~R RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6
~ FOR OFFICIAL USE I~NLY
tlie content oi' the policy followed. Policy must be adjusted if it
- is necessary to iil~prove image project~on. An executive committee
member said Tuesda~j n~ornin~, summ~,r~zing Bode's recommendations: "2'lie
' 1'vdA's policy is not wrong, but the narty's style, spirit, atmospl~ere
~,nd influence ~.re not suitable. The party must come ~.cross differ-
~ ently.
- `rh~.-t image--a reading o~ Bode's internal notes indicates--can be sum-
med uP in the followiiig, not ve'ry flattering ch~racterizations: the
PvdA is not credible--t~ie party m~.kes promises yefLr in, year out~,
H~l~ich it Icnows t~*ill not be lcept; the PvdA is incapa,ble--the ~,ppara,tus
' does not function, executive committee, party council, congresses
and clivision meetings are distinguished by great mutu~,l dissension;
tl~e PvdA is demanding--it issues ultimatums,. ~ives no a,rguments.
+ Unc~er tlie headin~ "l~dew Cour.se," the new r1~,x vf~.n den Berg declarect on
hiond.:,.,y in :JftC 1L'~N~:~LSI3T,~~ll the switch w'hich was discussed for 2 d~.}rs
in t;~e ~neulderbos ~fotel in i;h~ Guelders Garderen. Its key s,~ords
~,nper~r tc~ be borrowed c3.irectly from adjutant Hode's advertisin~ jar-
~;on: ":Ltti Lude," "communications disturbance," "inform~.tion," "sori; of
~ short circuits," "credibility."
Van den Iier~;'s face-lift has until now especially psychologica,l si~-
niricance, that ap~E~lies esPeci~,lly to the soci~,l securit,y of the
p~,rt,y ctiair~n~Ln himself, ~~~ho does not want to tie his fate t~ny lont;er
to ttie not very Promising pros~~ects of ttte left wing. Van den I3er~
ssz.id in V.LC ~LLNi~LLa~LnD: "I myself ~ras identified earlier .cith a
certain ~ain~ in tlie party~ but now I s~,y ti~e must integrate much more,
it is no� sink or. s~~;im." .
. lte~r~~.rdinc; the weekend. of cleliberation itself, really only Friday
even:ina itself :~ius ~~ori;h reporting--coinsecluentl,y as for the rest,
i~eol~le �ere confused. `1'he political leader (~en Uyl) considered it
his ciuty here to lceep up tlieir spirits. Une pa.rty le~zder said: "llen
~ U,yl helcl a pep t~~.lk a,nd, as in all pep t~,lks, it had no content."
Another leader said.: ."Den Uyl acted very self-confident. I-~ was
~.lmosl; ~,musing. Iie sat t~iere Ueamin~;, lookin~; around a.nd only things
- c~Lme out like: reltows, thin~s are ~oinp,~yell~ we will pull through
all ri~;ht."
T~,ro incidents t!:at ~'riday evening illustrated tha,t it invo.lved here
- t~ mcetin~ of the le~,dership of a polii;ical association. State Secre-
t~,ry li~,ns ICombrink tivho ~aants to remain lon~!er at t}ie 1�Iinistry of
l~'in~,nce, exPressed a viela, ~.~}iich showed surprisin~ a~reement ~.�ith
- thr,.t oP his present chief, Doctor of Laws Fons van der ~tee. Chairm~,n
V~,n der I3erg, in report issued {PB No lU2 1981/82) about trie econo-
mies ~~;hich the I'vdA had pledged itself to in the current bud~et ,year
Pelt himself bound to a maximum: "5 billion is t~ie limit and. already
unusii~til ty }ieavy. atate Secretary ICombrink, w}iom it m~,y be assumed
18
FOR OFFICIAL USE ONLf
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007142/09: CIA-RDP82-40854R040500040006-6
FOR OFFICIAL USE ONLY
li~,s been ~entrusted with the scope of the sprin~ report to a.Ppe~;,r in
6 weeks, declix~ed in advance such an umpteenth limitation. If tli~
Pvd.~1 z,rants to continue to govern and, nevertheless, ~~ants to main-
$fLlh the connection between minitnum wages ~,nd minimum bene~it, t}ien
more must Ue saved in ;overnment exPenditures, more th~.n 5 t~i'llion.
The executive committee listened to him. Wim Hleijer spoke in a con-
cilir~tory fashion. Minister Van Dam remained hidden behind his news-
p~.per the rest of the evening. No decision was ta~cen.
The Van der Louw Lobt~y (represented at the weekend of deliberation
by Aleijer, Peper, Kombrinlc and Heyne den Bak--the latter is ~t the
same time political consultant of the riinister of Culture, Recreation
and Social Welfare) directed its attack on the party itself. With
He,yne den I3ak iri the lead, the lobby wanted to subject the entire
party leadership to shock therapy. The leadership does not under-
stand the cauntrv's ~prol~lems. That was c~uite obvious from all the
protests a,g~,inst the proposec3 economies in the ~iealth Insur~,nce Act
benefits--while even much more was in store for them.
The prevailin~ ideas of the party leadership must be reformecl ~is soon
as possible. Den Uyl advised against the recommended theraPy. YePer
moder~,ted Den B~,k's words. The proposal was held over.
Then it came ~,s surPrise for everyone th~,t Aiax v~n den Ilerg a,n-
nounced the New Course Aionday, completely on his own initiative ~.nd,
- moreover, pledged. himself to minimum economy of 5 billion ("let us
first try to acllieve the 5 billion") and, by the way, gave up his
orrn main point of controversy (closing of the nuclear power pl~,nts in
Borssele and Dodewaard). The PvdA is doing its utmost, on the eve of
the election ca.mpaigns before town councils and Yrovincial ~states,
the result o~ which is predictable, to remain acceptable afterwards
~ to the CllA ~hristian Democratic Appeal7, which can then again talce
_ tlie road of a majority cabinet with the Wl) ~eople's Party for ~'ree-
d on~ and Democr~.cy7. Van d.en Berg's about-face ~,nticiPates th~it iie-
ve].oprricnt. If the CllA continues to to.lerate the PvdA lon~er as a
government partner, t,}1P, rea.l stru~~le will not break oiit in it, the
stru~;gle a.bottt more economies in social security, the stru~;~;le ~.bout
- ~aliether or not there will be any funda,mentally different setup of the
benefit system. Uen Uyl is ag~,inst that, but his top officials, the
Clltl ancl parts of the 1'vdA want to reduce all employee benef.its to
h~.lf tlie minimum plus an individual extra allowance, to ether ~,t the
most: full minimum benefit. (see VN ~VRI NLllEftLAi~~, 20 June
1981)� `1'here is a.lso the strug~le about whether or not a reduction
of the WAO ~a~a on L~,bor llisability7 benefit; whether or not compul-
sor,y work for 18 to 20 year olds and whether or not ~z jobs plan.
Ne~a Itetreat ~
The p~,rty executive.committee may still not have m~,de any politic~,l
~ d.ecision but the Second Chamber group has already begun with th~,t.
19
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6
FOR ~FFICIAL USE ONLY
The nroixP is ~oing baclc into the �oods next weekend (at the confer-
ence ~resort of i;l~e FederP.l Savings Ba,nk in Doorn) . ~ne day is re-
- served ~'or ~�.:tsicie spe~.kers to come and express their opini~ns about
the YvdA. The conclusion ~~ill perhaps be identic~,l (not credible,
inc~~.pable, demanding), but the motivation ~aill dif~er: among the
Ruests of tt~e group are both riient Jan Faber of the IKV ~nterchurch �
Pet~ce Counci~ and llr I~udin~ of the Amro Bank, Wim Kolc of the FW
~etherla,nds Trade Union k'ederatio~ and Jan Dogterom of the Associa-
tion for the Preservation o~ the �adden Zee.
'1'he second day could be of more political significance, because then
ttie j~~rlia.ment~.ry group, party executive committee and officials Max
van den ~erQ and Wim rleijer may listen. The subject for both of them
is tlie New Co~rse. ~dhat that implies, ~+Tim t~Ieijer has mana~ec? to ex-
plain very clearly for a weel~ and a halfy supPorted as he is by a
confidenti~.l memorandum from the deputy chairman of his parliamentary
~roun, Arie Van der tIek. Van der lIelc is by nature a realist~ although
].on~ before Van der Louw with his supporters decideiJ to be so. It is
all the more remarlcable that Van der fiek's work ("Concernin~: Socia.l
ancl ~irr~,ncial-economic poli~y ~or 1982") was not questioned durin~ a
- rat}ier detailed discussion in the group Tuesda,y last week, while there
was ever,y reason for tliat.
Va,n c'�er liek writes, takin~; a relative view, ~,bout the purchasin~ po~aer
of the lowest paid: '~T}ie condition of this income is not ~.bsolutely.
firr~ in terms of Purchasin~; power, but may drop less than every other
income." ~ S?'ith t}ia,t the PvdA group opens the way for purchasin~; power
drop o.f the lowest p~.id which exceeds '1 percent. He d.iscusses, ti*ith
precisely such a relative view, the income leveling which his politica.l
leader, llen Uyl~ stuck to, until now. The parliamentary group's report
dec7.ares: "The figures--1 percent and--4 percent are moreover, arbi-
trar,y ~for they are based on a method of computation whose va.lidity
must t~e questioned in adv~,nce."
Van der IIelc thinks tha.t the PvdA emPhasizes too little that~ restora-
tion of the economy is condition for new employment opportunity.
IIis report says: "l~le ~,re iiot t~,ken seriously about the goal of eco-
nomic recover,y~.
1[is o~pinion al~out t~te job plans of the inctividual ministers is: "`rlie
T'vci:1 must avoid counting out jobs from inconsistent plans, by manipu-
1fLtin~ election platf orMS ~nd ~overnment agreements, isolated from
soci~,l conditions."
Van der Hek franicly chooses "tax relief for the employers (the gover.n-
ment included)." ~ie gave the parliamentary group the choice. In tlie
Pirst plnce: sep~,rate the benefits from the wa~;es ~.nd thus keep the
benefits down. Second option: no separation, but let the employers
20
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2407/02109: CIA-RDP82-00854R000500040006-6
FOR OFFIC[AL USE ONLY
~ p~.y smaller premium to the social funds and let tr.e workers and
- benei'it recipients Pay a higher premium. Third possibility: no sera-
ration, ~ut reduce the ~ross wages.
Van c~er tielc rejected the first option at the present time (because
_ he oproses separ~.tion).and the third (because he orposes ~overnmeni;
involvement in wa~es for years). The second possible choice rema.in.s.
~ha,t means th~,t the Pvd.A favors reduction of net wa~es and benefits.
'Phe report says: "The released funds help to restore the com~etitive
position, but now the costs of it are paid by all ~vorl:ers ~.nd benefit
recipients together."
van d.er Helc thinks ~h~,t, besides the PvdA, the trade union movement
must also publicly commit itself to the choice of his second altern~.-
; tive. If that does~ not happen, then the Pvc~i will ha.ve to drop its
opposition to sept~ration. The confidential report says: "Coa].ition
; partners ~.nd the tr~,de union movement would have to expressly commit
_ themselves to 2. to prevent drifting toward 1.
COPYf~IGHT: 1982 VIvT/I3V ~deekbladpers
8490
CSO: 3105/94
;
21
- FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007142/09: CIA-RDP82-40854R040500040006-6
~ FOR OFFICIAL USE ONLY
MILITARY FRANCE
. ~
~
DEFENSE BUDGET FOR 1982 OUTLINED: AIR FORCE SEEN LACKING FUNDS
Paris AIR ET COSMOS in French 21 Nov 81 pp 11, 12, 64
[Article by J.G.: "The National Assembly Passes the 1982 Defense Budget--the De-
. fense Council Has Passed Several Measures Concerning the Nuclear Forces"]
- [Text] On Saturday 14 November 1981, the deputies to the National Assembly com-
pleted examination of the draft defense budget for 1982, discussion of which had
opened the d~y li~fore. While the minister of defense, Charles Hernu, was announc-
ing in the Assembly that the Defense Council Y~ad recently decided "to start on con-
- s.truction of a seventh missile-launching nuclear submarine" and that "the program
authorizations had been provided for starting in 1982 the first studies on a system
intended to succeed the Pluton," the Elysee's press,department was issuing a com-
munique announcing the following decisions, reached at a Defense Council meeting
held on 30 October last:
- --a seventh submarine, representing a new generation, will be built, to be plaGed
in service before the middle of the next decade;
--the number of missile-launching nuclear submarines on permanent patrol will be
raised to three within the next few years; equipping of them with the new multiple-
warhead M-4 missiles wi11 be continued;
--the Fluton tactical nuclear missile will be replaced, when it reaches the end of
its service lifetime, by a new ground-to-ground missile of greater range, to be
called the Hades, whose payloads will be defined later; ~
--a new ground-to-ground mobile ballistic missile will be develaped; this new stra-
~ tegic weapons system will succeed the Mirage IV's when the~? are retired from ser-
vice.
Anxiety of the Air Force Budget Rapporteur .
i
Before the statement by the minister, who was to justify the main options of the
_ defense policy as conceived by Mr Mauroy's government and defend the broad outlines
of his draft budget for 1982, Loic Bouvard, advisory rapporteur for the Air Force
budget, had told the Assembly of his anxiety, based on "several defects," which we
summarize briefly:. "The military programming law had provided that 22.27 percent of
the defense credits should be allocated to the Air section. Each year saw an ad-
vance toward that objective. But in 1982, the trend takes an unfavorable turn, and
from 21.24 percent of the defense budget in 1981, the Air section will drop to only
21.12 percent in 1982. The target is thus receding. The most direct result of
22
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED F~R RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6
h'ult uh~r?~iwL u~~: urLY
this harmful evolution is at the level of the program authorizations that lay the
groundwork for the future. In effect, the program authorizations for the Air sec-
tion will remain below the Fr 20 billion threshold next year, and on the basis of
the probable rise in the cost of military supplies, it will decrease in value as
compared to 1981." ~
The rapporteur then enumerated, in his speech, the four harmful effects of the ~
slowdown of the effort which, i.n his judgment, characterizes the 1982 budget:
"First of all, the reduction in orders of Mirage 2000's depressing the potential of
our air defense.
"The Mirage-2000 building program is already 2 years behi.nd schedule.... While the
first assembly-line planes, in the version designed for air defense, may be deliv- ~
ered in 1983, they will not at that time be fitted with their definitive engine.or
with the most highly developed radar, which will not be available in quantity until .
1986. Meanwhile, the Mirage 2000 will fly with the excellent radar with which the
- Mirage F1 is presently equipped; but that radar is not the best-suited for inter-
ception of airplanes attempting low-altitude intrusion.
"There is thus a delay in the technical completion of the Mirage 2000, but there is~ ~
also.a lag in the orders for the plane.... The Mirage 2000 was initially to equip
the Air Force in 1~382, Since that target could not be reached, the orders for Mi-.
rage F1's were increased. But next year, instead of ordering 40 Mirage 2000's, as
planned, it will be possible to order only 25, for lack of credits. Thanks to this
drastic economy measure, the Air Force, in view of the austerity imposed on it, re-
covers a cert~in mass of funds for maneuvering with that will enable it to cope
_ with its other needs one way or another.
"But the consequences ot this forced economy may be serious in the long term. For
the men, first of all:'the lag�in orders for the equivalent of a squadron o�~Mirage
2000's will make it necessary to keep a squadron of Mirage III's in service longer.
But this latter plane, which was excellent 15 years ago, will be run down in a few
years, despite its legendary touchness. The repetition of such an operation an-
other time could not at this point be done without risk to the life of the men who
will pilot the plane. ~
"Thexe is a serious consequence also for the Air Force's capacity: it will not be
possible to reduce the Mirage 2000 orders another year without the Air Force's be-
ing forced to decrease the number of the 450 planes that the imperatives of our de-
fense make it necessary to put into service.
"Secondly, the shortage in our stocks of combat munitions at the end of 1982--that
is, at the time when the next draft budget is being prepared--will be on the order
- of one-third, as regards shells for 30-mm cannons,~bombs, munitions fox the 20-mm
twin-tube antiaircraft gun and Crotales. The shortage will remain on the order of
_ 30 percent for air-to-air missiles; and it will not be inade up Eor the air-to-
ground rockets. .
"Thirdly, our military air transport's long-distance capacity remains insufficient.
The insufficient load capacity and range of our Transalls are known. To be sure,
25 Transalls capable of being refuelled in flight were ordered from 1978 to 1981;
23
F0~3 OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02109: CIA-RDP82-00850R000500040006-6
FOR OFFiCIAL USE ONLY
but no additional orders are planned either in 1982 or later. But the Nord 2501's,
some 100 of which are still flying, will not be replaced one for one. In addition,
the Transall cannot be used to carry powerful armored vehicles, of the AMX 30 type
or the new AMX 10 RC. Thus our external-intervention--'external-assistance'--
troops...can be supported only by light armored cars.... One can only deplore the
Eact that our military tra~lsport facilities are not always coherent with our re-
sponsihilities, our commitments and our strategy, and that nothing in the draft
budget is planned for remedying this situation. The re-engining of the fuel
~ planes, though useful in any case, is not a response adequate to the seriousness of
the problem: we continue to liave imperative need of a heavy long-range transport
plane.
"Fourthly, the modernization of the~ low-altitude defense of our bases is progress-
ing too lowly. A plan exists for achieving this result, to be sure, but its ful-
fillment is far too slow. In 1982, the credits will make it possible to build only
- 28 new shelters for airplanes and to provide doors for only 66 shelters. The annu-
al ordering of 56 ZO-mm twin-tube guns does not compensate for the crying absence
- of a missile that is effective against planes flying at very low altitude, which
_ could in this way thwart our air defense.... To remedy this deficiency, the gov-
ernment appears to be leaning toward purchase, in the United States, of a Grumman
E-2C Hawkeye airborne radar system. This system, in service in the American Navy
since 1976, is about five times less expensive than the Boeing AWACS [Airborne
_ Warning and Control System], but achieves performance characteristics that are
still compatible with the dimensions of French territory and the specific needs of
our defense...."
Thirty Mirage 2000's Ordered
The minister of defense, in his long address, desired to alleviate Loic Bouvard's
anxiety, specifying in particular "that at lea~st 30 orders (of Mirage 2000's) will
be made between now and 1983. The first Mirage 2000 planes will be equipped with
multimode Doppler radar..., with better performance characteristics than the pres-
ent radar with which the Mirage F1 is equipped. Furthermore, the Air Force will
order 30 Epsilon planes.
"Protection of the air bases remains one of the priorities of the Air Force, which
has devoted an ambitious 7-year plan to it. Fifty-six 20-mm antiaircraft batteries
' will be ordered in 1982, raising the total of orders in 6 years to 272, which is
120 more than the program law. At the same time, 28 concrete sheLters for air-
planes, and 11 underground PC's [Command Posts] will be built, by means of infra-
structure payments that total Fr 982 million in payment credits, which is an in-
� crease of 36 percent over 1981."
The Nuclear Forces
As regards nuclear armament, strategic and tactical, the minister gave the follow-
in specifics:
- "The credits devoted to the nuclear forces...will total Fr 20.135 billion in pro-
gram authorizations and Fr 16.499 billion in credit~paym.~nts. The increase in pro-
gram authorizations is considerably sharper than for Title V as a whole: 20.6 per-
cent as against.12.5 percent. Their proportion of the total equipment budget thus
_ goes up quite a bit, from 25.9 percent to 27.8 percent.
2~+
_ FOR OFF[CIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2407/02/09: CIA-RDP82-00850R000500440006-6
FOR OFFIC[AL USE ONLY :
"The increase in credit payments is 18.3 percent, which keeps the part of Title V
devoted tu the national strategic force and to tactical nuclear weaponry at 30.(:
- percent. The credits earmarked for the air component of the deterrent force cover
essentially the expenditures connected with the Mirage IV, the equipment of which
with electronic countermeasures is strengthened; with the C-135 refuelling planes,
which will be re-engined with CFM 56 jets developed jointly by SNECMA [National
Aircraft Engine Design and Construction Company] and General Electric; and with the
medium-range air-to-ground missile with which a squadron of five Mirage IV's will
_ be equipped in 1985.
''...The program authorizations provided for the strategic naval force, an essential
component of our deterrent force, total Fr 3.6 billion, up 30 percent from 1981. .
This increase reflects the continuance of construction of the sixth missile-launch-
ing nuclear submarine, the "Inflexible," which will enter the operational cycle in
1985, equipped with the new M-4 multiple-warhead missile. The strategic naval
- force also has to prepare for the refitting of the missile-launching nuclear sub-
marines, which wi21 receive the new M-4 missiles starting in 1987. Finally, the
missile-launching nuclear submarines presently in service have to be maintained, at
least, in operating condition.
"...For nuclear experimentation, a program-authorizations total is allocated that
makes it possible, as~regards the part transferred to the atomic Cesting center, to
continue the test-explosion programs, and as regards the armed-forces part, to fin-
ance the expenditures for infrastructure and for materiel equipment.
. "...Finally, as regards tactical nuclear weaponry, the credits provided make it
possible to finance the AN-52 weapon, the medium-range air-to-ground missile and
the Pluton weapons system." .
~ As regards the Army, the minister specified in particular, with reference to mis-
siles, that the Milan will still be delivered in 1982 but will not be ordered any
longer; that 38 speciments of the Hot will be ordered, which exceeds the targets of
the program law; but that on the other hand, the orders for t~ola:zd ground-to-air
missiles "will not make it possible to make up for the shortfalls accumulated dur-
ing the preceding 10 years"--though this will be done in 1983.
For the Navy, the minister stressed, three airplanes (Editor's Note: They are Fal-
con 20's) raill be ordered in 1982 in pursuance of the same Program aimed at giving
our country means for action on the high seas--means that are commissioned by the
~ Navy but on the operational level come~under the minister of. inax~itzme affairs.
The Armed Forces' Activities
, With reference to the armed forces' activities, the minister stated: "For the Air
Force, the objective of 5U0,000 hours of flying time, which represents minimum
~ training ~ime for the combat pilots, the carrying-out of transpart missions and
,Teneral training of personnel, has had to be reduced to 419,000 hours. This has
been made possible only by the decrease in the numb.er of pilots per plane, which
has gradually gone down from 1.6 to 1.2 ~
"For the air forces, 7U6,000 m3 of jet fuel and 16,000 m3 of aviatinn gasoline will
be provided in 1982, so as to reach total annual activity on the order of 420,000
. 25
- FOR OFFICiAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6
FOR OF1~'ICIAL USE ONLY
hours of flying time, making it possible to provide the combat pilots with 180
hours per year on an armed plane, to preserve the present l.evel af active flying
time for the navigatin-personnel schools, and for transport avistion to meet the
armed forces' needs."
Research .
The research programs to be continued in 1982 are: �
--for the Army: the main combat vehicle to succeed the AMX-30, the antitank heli-
copter, and the engineers' armored vehicle; .
--for the Air Force: development of the Mirage 2000.; its air-to-air weaponry; the
_ laser-guided bombardment systems; the M-88 engine;
--for the Navy: development of the SNA's [Nuclear Attack Submarines], of the mine- ~
- sweepers, the antiaircraft and antisubmarine� corvettes and their weapons systems:
_ DRBJ [expansion unknown] II radar, ~onars, missiles, and in particular the SM-39
antisurface missile, capable of being fired from a submerged submarine.
_ Exportation of Armaments
The minister of defense gave extensive information relative to exportation of arma-
ments, specifying in particular:
_ --the chairmen and rapporteurs of the parliamentary committees on de�ense and fin-
~ ance will henceforth receive, when they are made, the texts of the intergovernment-
al agreements governing programs that result in authorizations and grantings of
credits in the name of the Ministry of Defense; ~
--likewise, each transcation involving the granting of program authorizations under
Article 29 of the decision of 16 July 1966, wfi ich makes it possible to initiate
early orders tor foreign purchasers, will likewise be commun.icated to the chairmen
and rapporteurs;
--every 6 months, these personages'will receive a note summarizing the situation.of
our war-materiel exp~rts.
These data will comprise in particular the state of the orders and deliveries for
~ the previous 6-month period, details on these operations by broad categories of
ma[eriel, and a breakdown of the sales as between the OECD [Organization for Eco-
nomic Cooperation and Development] zone and regions outside the OECD.
= In Favor: 393 Votes
The 1982 defense budget was passed by 393 votes to 83, out of 480 eligible to vote.
_ Three deputies of the RPR [Rally for the Republic] group--Marcel Dassault, G. de
Benouville and Charles Haby--voted for the budget.
COPYRIGHT: A. & C. 1982
11267
~ CSO: 3100/269
26
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2407/02109: CIA-RDP82-00854R000500040006-6
FOR OFFlCIAL. USE ONLY
MILITARY ~ FRANCE
DEFENSE MINISTRY VIEWS FOUR OPTIONS IN AIR DETECTION SYSTEM
~ Paris AIR ET COSMOS in French 28 Nov, 5 Dec 81~ ~
[Article by J.G.: "France Seeks an Airborne Detection System--Grumman's E-2C Hawk-
- eye Is One Possible Solution; There Are Others"]
[28 Nov 81 p 33] ~
- [Excerpts] It is nothing new that.the effecCiveness of the means of detection that
the French air defense has for opposing penetration of er.emy craft into the nation-
al air space is not perfect. .While coverage of all of the territory at high and
medium altitudea is total, it proves in any.case insufficient, even very weak, aC
low altitude, since the threat at this level has become the preponderant ane, be-
cause of the increase of the ranges of action of modern sirplanes. In order for
French air defense to remain 100-~ercent credible, this defect must imperatively be
remedied. " ~ ~ �
Since the number of radar stations on the ground that one would have to have in or-
- uer to ensure effectively a homogeneous and continuaus low-altitude coverage is tar
too high for a ground-based solution to be ~nvisir~ned in piactical and economic
terms, airborne detection is the only other way to solve the problem.
For its part, the Air Force--which, in cooperation with the other armed forces and
within a broadly interministerial framework, fills a major role in the organization
on which air defense rests in France--has a choice among four solutions today: two
already existing airplanes, the Boeing E-3A and the Grumman E-2C, can function as
airborne detection platforms; and two oterh proposals can be considered, constitut-
- ing the cther two options: a Transall, the Franco-FRG plane, equipped wither with
an AEW (Airborne Early Warning) system developed by Marconi for the Nimrod Mk 3, or
- a system largely derived from the one developed by Grumman, who is an outstanding
specialist in logical applications, for the most recent version of the E-2C Hawkeye
in service in the U.S..Navy.
At the beginning of this week, the Grumman company invited to its Bethpage ,(Long
Island, New York) insta~lations, where the E-2C Hawkeye is assembled, a small group
of French journalists, both to present the plane to them (and the concept on which
its use is based) and to show them the diversification of the company's activities
and communicate its desire to try to develop closer relations with the French aero-
space industry and conclude agreements with other French industrial sectors.
27
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED F~R RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6
FQR OFFICIAL USE ONLY
Within the framework of this action, at the time that the signing of the important
contract signifying the breakthrough of the Ariane launcher into the United States
was announced in France (see Pierre Langereux's article on page 39), a representa-
tive of Arianespace present at Bethpage stressed the action and role of Grumman in
that operation. He admi.rted that when Arianespace was created 18 month~ ago, the
very idea of orders from the United States was unthinkable. He explained the suc-
cess of Grumman's action by the knowledge that the American builder has of space
problems and the poter.tial market for Ariane launchers in the United States.
In the specifically aeronautical.area, Grumman has already had or expects to have
contacts with some French industrial firms. To some, proposals have been made for
possible transactioris (this is t:ie case with Thomson-CSF [General Radio Company],
Crouzet, Turbomeca). Others, such as SOGERMA [Girondine Company �or the Mainten-
ance and Repair of Aeronautical Equipment], have expressed interest in possible
heavy-maintenance work, on the hypo*_hesis that the French government orders a num-
- ber of Hawkeyes.
~
I5 Dec 81 p 23)
[Excerpts) The Ministry of Defense, for its part, has already received the com-
plete results, communicated by the Air Force, of Che second operational evaluation
of the E-2C Hawkeye carried out at Mont-de-Marsan last Apri1. The results are pos-
- itive in many respects, though some serious uncertainties remain. In order to form
a more precise idea of the comparative merits and disadvantages of the two planes,
thQ Ministry of Defense has asked its departments to carry out a comparative study,
_ the conclusions of which shou?d be submitted to it by 15 April 1982 at the latest.
Boeing, which last Tuesday prese~nted to the press the E-3A AWACS in the standard ~
version for the U.S. Air Force and for NATO (see following pages), limited itself
to stating that it had not to date submitted any bid to the French Air Force, since
_ the latter has not told the Seattle builder anything about its operational specifi-
cations.
- The price announced is $78 million (1981 value) for the equipped plane at the
_ plant. Questioned about the cost of training the monitors responsible for exploit-
- ing the data during operational missions, the~Boeing representatives declared that
~ they could not give an exact figure. Questioned about the hourly fuel consumption
of the AWACS, they indicated 6,815 liters.
'I~o information missions comprising engineers of the DGA [expansion unknown] and
officers of the Air Force visited the Tinker base of the U.S. Air Force (this base
provides the support for the AWACS fleet) and Boeing (Loic Bouvard's report) a few
months ago. But Boeing has not been informed of the commentaries drawn up on th~
French side at the conclusion of these information flights.
The Air Force is not presently.considering carrying out a full-scale evaluation.of
- the AWACS over French territory. It is intending to call on NATO for gathering all
the information that it will consider useful. Within its budget limits, the Air
' Force is certainly not in a position to envision acquiring as many AWACS as Hawk-
_ eyes; in both cases, a minimum of four planes is necessary. I~ other ministries
participate in the financing of the E-3A, by virtue of the pluriministerial charac-
ter of air defense in France, the choice would not be posed in the same terms--on
condition, of course, that the participation o� the other ministries concerned is
not a symbolic one.
COPYRIGHT: A. & C. 1981 28
11267 FO~t OEFICIAL i1SE ONLY
CSO: 3100/268
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2407/02109: CIA-RDP82-00854R000500040006-6
FOR OFFICIAL USE ONLY
MILITARY � FRANCE
- . HELICOpTER DIVISION CHIEF DISCUSSES TRENDS, PRODUCTION,.R & D ~
Paris AIR ET COSMOS in French 19 Dec 81 pp 27-31
[Article by Jacques Morisset: "Marignane: Priority to Industrial E�ficiency"]
[Text) In 3 Years, the Helicopter Division of Aerospatiale Will Double Its
~ Production
The year 1980 was a very good one for Aerospatiale (.Helicopter Division) and its
American branch AHC: Fr 6.2 billion in orders, 85 percent of which was for export
to 39 cauntries; consolidated turnover of Fr 3.2 billion, 78 percent of it from ex-
portation; 345 helicopters delivered, and 639 new,craft of all types ordpred. Not
to mention important license contracts made with the Indonesian company Nurtanio ~
- for production of the Puma and Super Puma, and with the People's Republic of Chi.na
for prnduction of the Dauphin. On the whole, an entirely remarkable balance-sheet
--due to the success quite obviously encountered in the world market by the heli-
copters of the new range: AS-350 (Ecureuil/AStar), AS-35~ (Ecureuil-2~T.win=star),
SA-365N (Dauphin 2), AS�332 (Super Puma). ,
' Will 1981 be a fruitful year also? To find out, we asked that question of Francuis .
- Legrand, who kindly received the AIR ET COSMOS team. "At this year-end," the di~
rector of Aerospatiale's Helicopter Division replied, "it is still too early to
~ give you exact figures, but I can already tell you that our sales figure will
doubtlessly be even higher than that of 1980, which was itself a very good year.
Our market penetration is developing, and 1981, as you knc~w, has been marked by the
success of the Super Puma (which has broken through into the North Sea) and of thQ
Twin-Star. Our real problems are mainly proble~s of deli.very."
Optimizing the Production Instrument
"The complete renovation of our range represented a period of pure creation, and we
must now set ourselves to producing--whence the in-depth renovation of our produc-
tion instrument, as regards both means and methods and the organization of it. To
this systematic quest for industrial efficiency is added a big effort at adaptation
' to the civilian market, which has become our No 1 customer--whence the development
of after-sales service.
"In 25 years, we have succeeded in creating a helicopter industry that provides a
living for 25,000 to 30,000 persons in France. But profitability and compEtitive-
ness are the real factors of job-creation. In the coming 3 years, we expect to
29 ~
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6
FOR OFFICIAL USE ONLY
~ double the number of helicopters pro~uced and marketed. Whence, in order to
achieve the production level aimed at, the systematic use ~f computerization, of
modern manufacturing methods, of new materials. The increase in production also
can be achieved only by reorganizing the circulation of information, which is in-
dispensable for correct management of supply, storage, handling, which represent tt
considerable percentage of costs. .
- "As in the automobile industry, from which we are transposing certain achievements,
we are therefore led to optimize the whole of our production instrument. That is
what it will take to remain competitive. One need only see, for example, our glu-
ing line far Dauphin elements and the setting-up of preassembly lines to be con-
vinced that the investments made are justified."
- "Of course, all this does not mean in any way that we are neglecting research and
development, which enabled us to create the new range: we are now applying our-
selves to raising the level of research again,~s~ as to prepare for the next de-
cade's generation and to upgrade the existing one. Let us say that there is a cy-
clical calendar for development of a new range: research is followed by develop-
ment, then industrialization, which requires sizable investments. The nearly si-
multaneous launching af our three new helicopters created--if one examines the evo-
lution of expenditures over time--a certain wave effect, which is entirely normal."
Subcontracting .
"Anatlier problem is that of the subcontrac'ting network. The percentage we are
tending toward is 50 percent; a part of this subcontracting is of course assigned
to units of Aerospatiale's subsidiaries that are~likely to benefit from it. Sub-
contractinQ is actLally necessitated in the followinQ cases:
--search for the best ecortomic or technical conditions (specialized subcontract-
in~);
. '--adherence to industrial a~;reements made with other countries (cooperation, com-
pensation);
--utilization of reco~nized competencies (for example, Fiat for its transmission
cases); ~
--utilization also of the existing industrial capacities, on condition that they
- offer a good cost-effectiveness ratio.
"It is in this spirit that we are helping to ensure the work load of certain of our
group~s subsidiaries. The SOCATA [expansion unknown], for example, does 40 percent
- of.its work for our division."
Franco-FRG Cooperation
"For several.years, we have been working with MBB [Messerschmitt-Bolkow-Blohm] on an
'IIAC,' or antitank helicopter, praject (PAH-2 in the German terminology), the de-
velopment of which has in the last analysis proved difficult to carry out within a
budget framework that is too narrow for the ambitions of the project. Whence the
question that was posed last Spring: should something be done on the nationl scale,
- or should cooperation be started over again on other bases? Thus it was that the
HAP (Support and Protection Helicopter) concept arose, in whicli priority is given
to aupport and protection, with the nighttime antitank possibilities assigned sec-
. ond priority. Such a machine could be bui.lt on the basis of the present Dauphin,
- 30
FOR OFF[CIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007142/09: CIA-RDP82-40854R040500040006-6
. FOR OFF[CIAL USE ONLY
but given a different fuselage, and it would offer the desired qualities of maneuv-
erability, speed and protection.
_ "The HAP concept is developing. Such a machine ~hould be capable both of ground
intervention and of providing protection of helicopters from enemy craft. This
would require, for short distances, the use of a cannon with which a sighting and
orientation system would be associated; for distances of several kilometers, we
~ would need a missile, but a specialized missile, offering maneuvering capacities
very different from those asked of an antitank missile or even an air-to-air mis-
sile, because a helicopter has very high maneuverability.
"The most expensive item will obviously be the development of th~e weapons system.
Tt should be noted that in France we already have available to us thermal cameras
that are at least.as good as their American counterparts.. We are therefore favor-
, able to development of the Portos system (the designated successor to the Venus ~
system), via its components; if it proves really desirable, it will always be pos-
~ sible to go from a roof-sight system to a raised sphere system (Giraffe).
As for nighttime antitank combat, the idea is developing of simply.using third-
generation light-amplifying binoculars, which are simple and light, whereas a sys-
tem such as the American PNVS ~expansion unknown], which is too~sophisticated for a
battlefield, leads to complicated and expen$:.ve solt~t'ions. . . .
"This HAP, derived from the present Dauphin, would be a bi-TM 333,�weighin~ about
3.8 tons. ~ �
"None of this keeps anyone, on either the FRG side or the French side, from being
aware of the importance of starting up on cooperation again. A joint proposal has
therefore been worked up by the two industrial firms concerned and it has just been ~
submitted to the armament directors. It has two aspects:
--a proposal for development of a less expensive craft than the former PAH-2--in-
termediate, in a way, between it and ;:he French HAP/HAC concept. Weighing a little
more than 4 tons, this ship would use the dynamic elements of the Dauphin, but with
a rotor redesigned by MBB so as to obtain the additional li:ft needed and especially
the.additional maneuverability desired for the mass envisioned (4.2 tons). The en-
gines would be TM 385 R's--that is, engines derived from the TM 333, with the col-
laboration of MTU [expansion unknown]. The optronics would be those of the Portos
system, with possible use of U.S.~modules manufactured (under license) in the FRG.
The target date for the ~irst deliveries of oeprational machines is 1987. The fu-
selage configuration would probably be a side-by-si~le two-seater, with lower tur-
ret. It remains to find the financing, which would be facilitated by the export '
possibilities.
meeting is now planned for the first quarter of 1982: the ball is in the govern-
ments' (and the users') court.
--creation of a GIE [Economic Interest Group] responsible for managing, on an
ec~ual-importance basis, the adaptation of the Super Puma to the FRG's military
needs and the development of a European tactical transport helicopter. These craft
would therefore be built in three versions, differing only in their systems and
equipment: FRG, French, 'export.' The first machine, with a fuselage designed
- around the systems envisioned, could be flying at the end of 1984/beginning of
1985."
- 31
FOR OFFICiAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/02/49: CIA-RDP82-00850R040500040006-6
FOR OFFICIAL USE ONLY
Engines Named Desire...
What are your relations with Turbomeca?
"We note with pleasure the entirely remarkable.recovery of Turbomeca, which is
studying and developing new techniques and components; the Bordes firm, which is
coming back into top world position, is showing an obvious desire to defi.ne a range
of new products, beyond the "Makila," with which we are particularly satisfied but~
which is actually a transitional engine.
"The new generata.on that we need can be defined as follows: a 500-HP family, a
1,000-HP family, a 2,000-HP family. Priority should be given to the 1,000-HP tur-
boengine: it is repr -ented by the TM 333 (850 HP) and its derivative the TM 385 R
(1,000 HP
"We need it for 1985, in order to upgrade the Dauphin.
~ "Next comes a modern turboengine of 1,800/2,000 HP, called on to succeed the Maki-
la; it will enable us to develop, for the 1990's, a Super Puma Mk 2.
"We also need, for the Ecureuil-2, a 450-HP turboengine equivalent to the present
Allison but in a more modern version. The studies started at Bordes 2 years ago
led to an economic impossibility; and since that time, the dollar has climbed, and
the price of the Allison too. We are therefore reexamining the balance-sheet of
the engines' cost in relation to that of the craft, while Turbomeca, for its part,
is studying the possibility of developing a simple and not too expensive engine
that could replace the Allison.
"The AS-355, in fact, is being called on to replace the Alouette-3, and we will
_ perhaps be led to develop an AS-355 Mk 2 with a more spacious fuselage. The Air
Force is going to equip itself with AS-355's fit~ed (in the first batch) with Alli-
son engines. A decision will be taken later for a second batch capable of receiv-
ing the future Turbomeca engi.ne as a retrofit. It should be noted that the financ-
ing of this new engine is being ensured jointly by the DGA and the DGAC [expan-
sions unknown], with a certain amount of self-financing by Turbomeca.
- "The development of a military Ecureuil-2 will, of course, entail certain adapta-
tions; the military AS-355 will be perfectly well-adapted to liaison, training,
specialized missions (surveillance of 'sensitive' bases). It will also be able to
take light armament, but in this role, the Gazelle remains a remarkable machine.
The Programs
Etienne Lefort, program chief to Mr Legrand, drew up for us a balance-sheet of the
programs in progress:
--The Super Puma is now being turned out on an assembly line; there are firm orders
for some 100 craft, not counting the options (including some 20 military machines).
In fact, practically all of the 150 craft on which manufacture has started are al-
ready sold. Deliveries began in July, and some 20 Super Pumas will have been de-
livered by the end of this year. The rate of delivery will reach 4 per month dur-
_ ing the first quarter of 1982, and it will rise to 5 or 6 per month at the end of
that year, which will~see the delivery of the 80th machine.
32
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6

APPROVED FOR RELEASE: 2007/42/09: CIA-RDP82-40854R040500040006-6
N'OR Oh'H't(:IAL US~; UNLY
After the Super Puma's remarkable breakthraugh into the civilian market, offshore
in particular (after the North Sea, the North American market, which has not yet
been worked very much, is opening up in turn, the Super Puma being very competitive
vis-a-vis the Bell 214 ST, which has not taken over), 1982 will probably be the
year of the breakthrough into the military market, especially in the short version~
- (180 kg ligh.ter). The machine is now certified in its two versions, at 8.35 tons,
but the flying range has been opened up to 9.75 tons. In its category, the Super
Puma is best as regards safety (big reserve of power), comfort (low vibration lev-
el, low noise level, thanks to special internal fittings), economy of operation
(initial potential: 3,000 hours; easy access for maintena.r~ce), oatput (high speed),
possibilities of flight in an icy atmosphere (testing program planned this winter
in the Grand Nord). �
--Dauphin: more than 400 machines have been sold, including the SA-360'E, the
SA-365C's and the 90 SA-366G's.of the U.S. Coast Guard.
Some 10 SA-365N's have now been delivered, and high production rates are planned:
10 machines per month at mid-1982, 16 per month at the beginning of 1985: Con-
struction of 30C machines has started.
It remains to obtzin the American and $ritish IFk [Instrument Flight Rule~] certi-
fications, expected in the first quarter o� 1982. The Arriel turboengine, which is
- proving satisfactory, is being delivered right on time by Turbomeca. Effort is now
being concentrated on certification of the optional equipment: radio, built-in flo-
tation, special equipment for offshore operations. Final development of the
SA-366G.is completed (French certification anticipated in first quarter or 1982).
--Ecureuil: 1981 was the year of the AS-355, some 450 of which have now been or-
dered, a good 100 of which will have been delivered by the end of this year. The
fabrication rate is around 20 machines per month. IFR certification is anticipated
in mid-1982.
Some 750 of the single-engine version (AS-350) have been ordered, including 450
AStars with Lycoming engines and 300 Ecureuil with Arriel engines. After the line
was temporarily shut down because of delays in deliveries by Lycoming, it was reac-
tivated, the American engine manufacturer having finally managed to solve its prob-
lems. At the end of this year, more than 500 AS-350's will have been delivered,
and the two parallel lines are now operating at full speed: in the first half of
1982, the rate will reach 35 to 40 machines per month (AS-350's + AS-355's). At
- the end of 1982, the rate will rise to 50.
--Lama: the SA-315 is still coming off the line. This "crane" version of the Alou-
ette is still valued, because it is irreplaceable. About 360 Lamas have now been
delivered, and the fabrication rate has been stabilized at 2 machines per month.
In a few years, a Lama Mk 2, fitted with a TM 333, shauld appear.
--Finally, the Gazelle, whose assembly line has stayed open because of the Army's
orders, is the object of new interest, while the last Super Frelons are being de-
livered (104 machines have come off the line). The Super Puma equipped with AM-39
missiles is now taking over.
COPYRIGHT: A. & C. 1980
END
11267
CSO: 3100/241 3g -
FOR OFFICIAL USE ONLY
APPROVED FOR RELEASE: 2007/02/09: CIA-RDP82-00850R000500040006-6