CENTRAL INTELLIGENCE BULLETIN

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79T00975A024900110001-3
• Release Decision: RIPPUB
• Original Classification: T
• Document Page Count: 16
• Document Creation Date: December 15, 2016
• Document Release Date: November 26, 2003
• Sequence Number: 1
• Publication Date: July 27, 1973
• Content Type: REPORT

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Top Secret
Central Intelligence Bulletin
State Department review completed
Top Secret
C
27 July 1973
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21 July l!0/_i
Central Intelligence Bulletin
EUROPEAN COMMUNITIES: West Europeans overcome some
French resistance to accommodating US on number of
issues. (Page 1)
CAMBODIA: Khmer Communists edging ever closer to
Phnom Penh. (Page 3)
LAOS: Negotiations moving forward. (Page 4)'
INTERNATIONAL MONETARY DEVELOPMENTS: German mark
rises against all major currencies; dollar loses
ground. (Page 6)
CHILE: Formula for easing tensions continues to
elude Allende. (Page 8)
ISRAEL: Dayan calls for activist policy in occupied
Arab territories in opening salvo of election cam-
paign. (Page 9)
WORLD YOUTH FESTIVAL: Organizers hope to gain in-
ternational support for Soviet policies. (Page 10)
FOR THE RECORD: (Page 11)
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EUROPEAN COMMUNITIES: At meetings in Copenhagen
and Brussels this week the West Europeans made prog-
ress in overcoming French resistance to accommodating
the US on a number of issues.
The political consultations of the Nine in Co-
penhagen focused on President Nixon's expected visit
to Europe in the fall. French Foreign Minister
Jobert, initially contending that Europe should ex-
press its "identity" by refusing to develop a con-
certed approach to the visit, later conceded that,
the visit could be the starting point of a US-
European dialogue. The political committee will
now work toward developing a consensus on the issues
to be raised by the Europeans and on the communique
to be issued after the meeting of the President with
top community officials.
The French insist that defense matters be kept
out of the US-EC discussions; such matters, they say,
should be reserved for the NATO forum, where they
would be the only questions addressed. Paris was
satisfied on this point, and the resulting division
of tasks between the NATO and EC forums argues
against the development of a single, all-encompassing
Atlantic declaration.
Still, the effect of these two meetings has
been to affirm the beginnings of a community per-
sonality that, bridges economic, political, and de-
fense concerns. The permanent representatives to
NATO of the EC countries--i.e., minus Ireland--will,
according to Belgian Political Director. Davignon,
coordinate on the defense aspects of the President's
visit. Representatives of the Nine also met this
week to provide "some analysis" of the recent US-
Soviet agreement to prevent nuclear war. It was
also agreed, despite French, reluctance, that conver-
sations of an individual EC member with the US would
henceforth be reported "fully" to the others of the
Nine.
In Brussels, the Nine rejected a French pro-
posal that the coming multinational trade negotia-
tions be held up until the dollar had returned to
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its parity of 12 February. In a conversation with
the US Embassy, the director of economic affairs
at the Quai conceded this defeat. He claimed, how-
ever, that the French did succeed in "strengthening"
the link between the trade and monetary negotiations.
Paris is showing some softening in its opposition
to EC compensation for the US to offset trade damage
from the community's enlargement. 25X1
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CAMBODIA: Phnom Penh Area
-, 'K rxpong.
Cfi"hying
Cambodian
Army 7th Div PHNONI
PEN H >-
Pochentong
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CAMBODIA: The Khmer Communists are edging ever
closer to Phnom Penh.
The heaviest fighting is centered five to seven
miles south and southwest of Phnom Penh where Cam-
bodian Army troops are strung out along a rough de-
fense line that cuts across Routes 2 and 3 and ends
within a few miles of Route 4. The Communists are
keeping steady.pressure on this front, concentrating
most of their efforts along Route 3. Some insurgent
elements are now only five miles from the capital's
airport; others are in contact with the army's 7th
Division in an area ten miles northwest of Phnom
Penh. Thus far, the division has held its own.
Despite the fact that a substantial portion of
the capital's regular defense force is committed to
these two areas, the Khmer Communists have not tried
to attack poorly defended installations closer to
Phnom Penh or to cut Routes; 4 and 5, the capital's
vital supply lines. Instead, the insurgents are
using conventional tactics in an effort to grind
down government strength and slowly tighten the
ring around the capital. Although these tactics
leave the Communists vulnerable to air and artillery
strikes, they seem quite willing to take substantial
losses in personnel and equipment.
In a bid to improve the deteriorating situation,
the government has ordered a "general mobilization."
This move is aimed largely at providing badly needed
manpower for the armed forces. A conscription law
is being implemented, large numbers of deserters
are being rounded up to return to military duty,
and personnel from the general staff and other mili-
tary offices in Phnom Penh are being assigned to
field units in the ca ital area.
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LAOS: The negotiations in Vientiane are
moving forward. Chief government negotiator Pheng
Phongsavan says that his Communist counterpart,
Phoumi Vongvichit, made significant concessions
on 24 July. Phoumi reportedly is willing to drop
his demand that Communist leader Souphanouvong be
appointed sole deputy prime minister and is no
longer insisting that the Communists be given the
defense or interior ministry.
In return for these concessions, Pheng stated
that the Communists would insist on only one thing--
that they have a veto over the operation of joint
Lao mobile inspection teams that are to verify the
withdrawal of foreign forces. Pheng believes that
Souvanna will accept this demand in order to get a
new government formed by 15 August.
Some significant problems must be overcome
before the Prime Minister's deadline can be met.
If Pheng cannot iron out the remaining issues with
Phoumi, Souvanna will personally take charge of the
talks. The Prime Minister believes that it is time
to reach an agreement and may quickl accept Commu-
nist terms on the remaining issues.
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INTERNATIONAL MONETARY DEVELOPMENTS: News of
another large West German trade surplus in June,
together with continuing tight credit conditions
there, drove up the value of the mark against all
major currencies yesterday. Despite substantial
support from the Bundesbank, the dollar fell almost
a full percentage point relative to the mark.
The mark was worth 44 cents yesterday as op-
posed to 31 cents a year ago, and it is back again
at the top of the European joint float band only a
month after the latest revaluation. Although the
other joint float currencies are being pulled up
along with the mark, the gap between the strong and
weak has been widening, thus putting the joint float
in jeopardy. The weakest ones--the Dutch guilder,
the Norwegian and Swedish crowns, and the French
franc--all needed substantial Bundesbank interven-
tion to maintain the narrow European currency band.
Germany's trade surplus of $710 million last
month compared with $390 million in June 1972 in-
dicates how ineffective a parity change can be under
unsettled market conditions. The 41-percent appre-
ciation of the mark relative to the dollar since
December 1971 has done little to reduce the inter-
national competitiveness of German goods. Only 10
percent of German trade is with the US, while over
50 percent i.s with joint float countries whose cur-
rencies relative to the mark have depreciated far
less.
Bonn has several options:
--it can continue to purchase dollars and joint
float currencies in increasing amounts, thereby
undermining the Bundesbank's anti-inflationary
policy;
--it can revalue the mark again;
--it can break away from the joint float alto-
gether.
(continued)
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Bonn has so far been unwilling to follow the last
course, which could have a detrimental effect on
European unity.
Meanwhile, the decline of the pound accelerated,
and yesterday it reached its lowest level since April.
The decline is related to a poor trade performance
and continuing inflation in the UK, as well as to
high interest rates on. the continent. The decline
apparently is being fed by trader expectations of
further weakness of the pound. Such expectations
have been a major factor in the dollar's decline
this summer as well.
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CHILE: The formula President Allende has been
seeking for easing tensions may be nearer his grasp,
but it still eludes him.
In an impassioned speech on Wednesday, Allende
reiterated his plea to the opposition Christian
Democrats to help avert civil war by entering into
a dialogue with his government. The President
emphasized once again that this would not mean a
retreat from Popular Unity principles or programs,
but he dealt with major issues of concern to the
Christian Democrats and the armed forces in concil-
iatory terms.
The Christian Democrats reportedly are ready
to begin talks with the government if the armed
forces participate as members of the cabinet. In
his speech Allende denied rumors that the re-entry
of the armed forces into his government is imminent,
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Allende's condemnation of leftist "ultrarevo-
lutionaries" as tools of the far right may be a
sign that he is trying to rally his more moderate
supporters behind a compromise with the armed forces
on the conditions under which military officers
would re-enter the cabinet. He may also be seeking
to split the Socialists and the Communists, in their
tough stand on this and other issues, a stand that
has been hampering his own ability to maneuver. In
so doing, of course, Allende risks seriously strain-
ing his governing coalition.
Allende must also try to prevent activities by
leftist and rightist extremists and by private
groups--such as the truck owners' strike declared
yesterday. Such activities could provoke military
action against the regime before a political truce
can be arranged. Pressure from middle-grade offi-
cers for independent military action to resolve
Chile's problems is on the rise, and serious plot-
ting at higher levels, especially in the navy and
air force, appears to be increasing.
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ISRAEL: Defense Minister Dayan has fired an
opening salvo in the campaign for the elections in
October by suggesting he might not be able to run
on the Labor Party ticket unless he is satisfied
with the party platform.
Dayan believes a peace settlement with the
Arabs is a long way off, and he favors an activist
policy of Israeli settlement. and Israeli economic
development in the Arab territories. Other notables
in the ruling Labor Party--Prime Minister Meir,
party boss Sapir, and Foreign Minister Eban--have
been decrying this "creeping annexation" idea in
their campaign speeches. They point to the eco-
nomic costs, the demographic threat posed by Arab
populations, and the permanent block to a peace
settlement that such policies entail.
To keep Dayan in the party, however, they will
have to go at least part way to meet his demands.
On the other hand, despite his popularity, Dayan
does not really want to pursue his political career
outside the party or give up his defense portfolio,
and in time he too will probably make a pragmatic
accommodation with the party leaders.
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WORLD YOUTH FESTIVAL: The tenth World Youth
Festival opens tomorrow in East Berlin. Its or-
ganizers hope to garner international support for
Communist, and particularly Soviet, policies from
20,000 young and not-so-young delegates.
Sponsored by the World Federation of Democratic
Youth and the International Union of Students, the
festival will be dominated by Communist and Commu-
nist-front groups. Non-Communist groups, mainly
from the less-developed states, will also take part.
The nine-day extravaganza will focus on Southeast
Asia, the Middle East, national liberation move-
ments, international security and cooperation, mo-
nopolies, and fascism.
This will be the first such event since the
predecessor festival in Sofia in 1968 was disrupted
by the New Left and other unruly groups. This year,
the East German hosts, anxious to preserve their
new-found respectability in the West, have taken
precautions to prevent a repeat of the fiasco in
Bulgaria. Stringent security measures have been
instituted to counter any demonstrations, whether
by West German or other elements. Despite such
measures, Pankow still fears that incidents may be
provoked by Arab extremists or leftist fringe groups.
The Soviets also hope to keep the conference
under control. They will seek to impress the dele-
gates with the need for the unity of anti-imperialist
forces, but will defend their pursuit or detente as
bein in the interest of all progressives.
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FOR THE RECORD*
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Mozambique: The Portuguese Defense Ministry
has named General Tomas Basto Machado to be the new
commander in chief of forces in Mozambique. F _j
Lisbon had been dis-
satisfied with the ormer commander's inability to
halt the spread of the Mozambique insurgency. Ad-
verse publicity over alleged atrocities during his
command may have hastened the day of his removal.
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'These items were prepared by CIA without consulta-
tion with the Departments of State and Defense,,
27 Jul 73 Central Intelligence Bulletin
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