CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A023000110001-3
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 13
• Document Creation Date: December 14, 2016
• Document Release Date: July 7, 2003
• Sequence Number: 1
• Publication Date: October 26, 1972
• Content Type: REPORT

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D
DIRECTORATE OF
INTELLIGENCE
Central Intelligence Bulletin
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No. 0257/72
26 October 1972
Central Intelligence Bulletin
LAOS: Pathet Lao send a top leader to negotiate.
Page 1)
YUGOSLAVIA: Serbian leaders resign under fire.
(Page 2)
SYRIA-IRAQ: Damascus demands larger payment for
use of of pipeline. (Page 3)
ISRAEL: F-4 Phantoms (Page 4)
STERLING AREA: Pound at all time low (Page 4)
INTERNATIONAL FOOD GRAIN SITUATION: A review of
world wheat and rice markets. (Page 5)
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LAOS: The dispatch of a top Pathet Lao offi-
cial to Vientiane is a further sign that the Lao
Communists believe the time is right for serious
peace negotiations.
Radio Pathet Lao on 25 October announced that
Phoumi Vongvichit had departed the Communist head-
quarters at Sam Neua for Vientiane where he will
serve as "special adviser" to the Lao Communist
negotiating team. Phoumi is generally regarded as
one of the top three Lao Communist leaders and will
have considerable discretion in dealing with gov-
ernment negotiators.
At the second session of the talks on 24 Octo-
ber, chief Communist negotiator Phoune Sipraseuth
concentrated on the familiar arguments that Souvanna's
government can no longer be considered the neutral
government of national union set up in 1962 by the
Geneva Conference and that the two sides must nego-
tiate on an equal basis to establish a new coalition
structure. Both the government and the Communists
have now set forth initial bargaining positions based
on their well-known public views concerning political
issues. Serious probing for signs of give could
begin at next week's talks. Although on 24 October
Phoune castigated the government for a lack of "good
will and realism," he held out the hope of construc-
tive dialogue by admitting that "certain points" in
Vientiane's position are "capable of bringing us
together."
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YUGOSLAVIA: The top leaders of the Serbian
party have resigned under fire, and Tito may have to
intervene directly to fill the leadership vacuum and
restore order in Yugoslavia's largest republic party.
Last week Tito personally attacked the republic
leadership for its resistance to his demands for
party recentralization. On 21 October a Serbian
central committee plenum accepted the "resignations"
of party boss Marko Nikezic and his second in com-
mand, Latinka Perovic. The central committee did
not announce the move until four days later. Another
plenum is planned for the near future, presumably
to select a successor to Nikezic. Tito's primary
problem is to find a replacement who will be able
to restore confidence and carry out his orders. The
confusion and uncertainty among Serbian officials,
many of whom are Nikezic's appointees and are sim-
ilarly vulnerable, have demoralized the party or-
ganization. The deterioration is such that 30 out
of 40 members of an important party commission
failed to appear for a meeting on Tuesday.
A wider purge may be in the offing. On 23 Oc-
tober, the central committee warned against personal
vendettas but simultaneously demanded punitive ac-
tions, including expulsions from the party. The
Vojvodina party, which is affiliated with the Serbian
organization, also appears to be affected. There
are demands for self-criticism by provincial party
leaders.
The fallout from Tito's demands, expressed in
his letter of 17 September, for radical changes
throughout the Yugoslav party also threatens the
third party conference scheduled for late November.
The executive bureau has ordered that plans for the
conference be reviewed in light of Tito's demands.
Last week, Communists at Belgrade University requested
a postponement of the conference, which is to revamp
the regime's youth policy. Tito probably will not
permit a postponement because this would indicate
indecision and inaction, two chronic party failures
that he is now committed to cure.
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SYRIA-IRAQ: Damascus has demanded larger pay-
ments from Iraq for oil transiting the Syrian portion
of the nationalized Iraq Petroleum Company (IPC)
pipeline.
Iraq has not kept up the payments of the tran-
sit fee paid by IPC before nationalization and Syria
is pressing Iraq either to meet its demands or pro-
vide a loan pending a settlement. Damascus, however,
probably will not close the pipeline, which is the
principal outlet for Iraqi oil, because Syria needs
these funds to cover its budget deficit. Prior to
Iraq's nationalization of IPC's holdings last June,
company payments to Syria were about $64 million
annually for transit rights, as well as a minimum
of $3 million in hard currency to Syrian oil workers.
The transit payments accounted for about 14 percent
of Syria's total revenues in 1970.
Both sides apparently are far apart on terms
for a settlement. Damascus has stated that it hopes
to receive double the amount it was paid prior to
nationalization, while Baghdad reportedly has offered
to make payments at the old IPC rate and provide a
portion of the profits it has realized from nation-
alization. Both countries are ruled by Baath party
elements, but they have strong differences stemming
from personal and political bases and have a history
of diplomatic haggling, even over issues of mutual
interest. Failure to arrive at a prompt settlement
will only lead to further strains in their relations.
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ISRAEL: F-4 Phantoms in the Israeli Air Force
are receiving only minimum maintenance
in
reportedly are being ignored and planes
frequently are flown with inoperable subsystems.
An F-4 with some 550 flying hours recently was sent
to Israel Aircraft Industries Ltd. for inspection
where it was judged to be in such bad shape that
it should not be repaired. The air force had con-
sidered the plane to be in average condition. An-
other US source claims the Israelis are wearing
out F-4s some three times faster than the US Air
Force. Despite these reports, the Israeli Air
Force is known to have lost only one F-4 due to
a malfunction and none has been taken out of service
since the first aircraft were received in 1968.
STERLING AREA: The fall of the pound sterling
to its lowest level in history has forced additional
nations to withdraw from agreements with the UK under
which a fixed percentage of a country's reserves is
held in sterling. South Africa has cut its ties to
the pound and has set the value of its currency
about four percent above the rate to which the rand
had floated. Malaysia also has unilaterally with-
drawn from its sterling agreement and has substan-
tially reduced its foreign exchange reserves in
sterling. Singapore, Hong Kong, Australia, and
New Zealand cut their sterling ties last summer
after London floated the pound.
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INTERNATIONAL FOOD GRAIN SITUATION:
A poor wheat harvest in the USSR has resulted
in an unparalleled Soviet demand for imports, and
there are unusual requirements for rice by several
Asian countries. Although adequate quantities of
wheat are available on a world-wide basis, transport
and distribution problems have left some countries
in a deficit position. The supply of rice is ex-
pected to become more critical next year as a result
of crop shortfalls this year, while the tight wheat
market may ease. World wheat trade in the 1972-73
crop year will set a record at some 63-65 million
tons, up 20 percent from last year and exceeding by
a small margin the previous peak in 1965-66, which
also followed poor Soviet and Indian harvests. The
extraordinary recent demand for wheat has pushed
up both the price of wheat and ocean shipping
freight rates for all grains.
WHEAT
Traditional importers of wheat have felt the
greatest impact from the rise in world wheat trade.
Those buyers who usually purchase wheat periodically
throughout the year--for example, Japan--have borne
the brunt of rising grain prices. The cost at Rot-
terdam for US hard winter wheat, for example, rose
nearly 40 percent between 28 June and 4 October
1972. Most of Moscow's unusually large purchases
were arranged for in July and early August-prior
to and, in effect, the major cause of the price rise.
Moscow has since picked up additional small quan-
tities of wheat from suppliers in Eastern and West-
ern Europe and Australia. Wheat purchases by the
USSR from all sources for delivery by mid-1973 now
total almost 19 million tons, compared with only
four million tons in the year ending last June.
The increased costs of shipping will be felt
by all grain importers. Ocean freight rates between
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August and mid-October rose by 55 percent and are
still climbing. They may peak in mid-winter when
the largest portion of grain under contract is sched-
uled to move.
Although their reserves will be reduced by at
least one third during the current crop year, the
US and Canada remain the grain "storehouses," with
substantial amounts of wheat in reserve. Certain
kinds, however, are in short supply. Canada's sales,
however, have been limited by the shortage of rail
transport from its wheat producing areas and by
strikes and the lack of storage facilities at its
ports. Moreover, the major St. Lawrence Seaway is
closed to shipping for several months during the
winter.
Argentina and Australia--the other major wheat
exporting countries--will be harvesting their south-
ern hemisphere crops in December. Argentina is ex-
pecting a good crop but Australia's wheat harvest
probably will be smaller than average and most of
its anticipated exportable surplus is already com-
mitted. Australia has agreed to supply China with
one million tons for delivery during the first half
of 1973, the first such shipments since 1969 when
Peking suspended orders for political reasons. Can-
berra also has promised one million tons to the USSR
for delivery by mid-1973. Countries in the Euro-
pean Economic Community produced a record crop this
year, permitting some increase in their usually
marginal exports.
Unless the elements remain particularly unkind
to the USSR, the record purchases of wheat are not
likely to be repeated next year.
Moscow, however, even under normal growing con-
ditions, will continue to import some wheat to meet
both domestic and foreign commitments. The require-
ments of the regime's livestock program caused a
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serious depletion in government wheat stocks in 1969
and 1970 when a large quantity of wheat was used
for livestock feed. Moreover, the Soviets may con-
tinue to feed large amounts of domestically grown
but low-quality wheat to livestock, requiring more
imports of milling quality wheat to meet their own
demands for flour and exports. The Soviets tradi-
tionally export about five to seven million tons of
wheat and flour to their client states. The USSR,
whose purchases of coarse feed grains rose to about
nine million tons this year, probably will continue
to purchase significant amounts for the next several
years. India also may be forced to resume wheat
imports next year because an unfavorable monsoon
has sharply reduced foodgrain output there.
Traditional importers of wheat, having been
stung by market events this year, may feel it pru-
dent to arrange for supplies earlier next year.
Many wheat producers probably also will try to boost
production next year. Such actions would in them-
selves engender further uncertainty in the interna-
tional wheat market. At a recent session of the
International Wheat Council--which formerly set
world prices but now has become largely a meeting
place for importing and exporting nations interested
in maintaining an orderly market--Japan suggested
consideration of relaxation of production and acre-
age controls maintained by some producers. Recog-
nizing the difficulty of predicting world demand and
supply a year hence, Tokyo suggested, nevertheless,
that some predictive effort be made to stabilize the
future wheat market. The council next meets on this
subject in late November.
The real crunch in the rice supply situation
is yet to come. Unfilled orders this fall have
totaled about 500,000 tons, but the situation may
well become more acute next year. The major diffi-
culty with the rice market in the short term has
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been in transporting and distributing to deficit
countries available supplies from those few sources--
largely the US, Thailand, and Japan--which still
have small reserves.
The bulk of the 300 million tons of rough rice
produced in the world annually is consumed domes-
tically; only about five percent enters interna-
tional trade. Therefore, even minor shifts in
production significantly affect world rice prices.
A shortfall in output, for example, often shifts a
country from borderline self-sufficiency to an im-
porter status, while bumper crops depress world
prices as producers attempt to export their sur-
pluses. Export prices for Thailand's first-quality
rice, for example, currently are about 20-30 percent
higher than they were in the early spring.
This year, several Asian countries suffered
shortages as a result of an unfavorable monsoon,
floods, crop diseases, and war. Exportable stock-
piles in the surplus countries had already been re-
duced in the expectation that the developing coun-
tries would continue to provide a larger share of
their own needs as a result of improved agricultural
methods and use of new high-yield varieties of seed.
This year Cambodia has temporarily shifted from
exporter to importer status, largely due to war and
bad weather. The Philippines, after being self-
sufficient for three years, had to increase imports
for the second year in a row due to rice disease
and floods. India and Thailand also were particu-
larly hard hit by bad weather. Thailand, tradi-
tionally a major world exporter, had reduced its
rice stocks to a minimum level by mid-1972 and
next year's exportable surplus is expected to be
considerably lower. Crop mismanagement has reduced
production in Burma and Indonesia, and crops'in
Bangladesh and South Vietnam have been disrupted by
war. Output of rice in China apparently dropped
this year and there is no indication that Peking is
willing to increase its rice exports at this time.
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and supply.
Supplies from generally poor crops this year
will be depleted by late spring, several months be-
fore the major fall harvests begin. Exportable sur-
pluses next year are likely to be as much as one mil-
lion tons lower than in 1972 as production drops and
exporters' carry-over stocks are reduced by demand
this year.
Rising prices will lead to greater efforts to
expand production for the fall harvest in 1973 but,
once again, the vagaries of weather, and economic
and political conditions will influence both demand
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