NATIONAL INTELLIGENCE BULLETIN
Document Type:
Collection:
Document Number (FOIA) /ESDN (CREST):
CIA-RDP79T00975A026700010006-9
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RIPPUB
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T
Document Page Count:
26
Document Creation Date:
December 16, 2016
Document Release Date:
March 29, 2005
Sequence Number:
6
Case Number:
Publication Date:
June 20, 1974
Content Type:
REPORT
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National Intellence
Bulletin
-State Department review completed
Top Secret
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co N o 6 31
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National Intelligence Bulletin
June 20, 1974
CONTENTS
USSR: Hard-currency surplus will improve Soviet posi-
tion in economic negotiations. (Page 1)
LAOS: Concern mounts over Communist political gains.
Page 3)
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URUGUAY: Military forms generals' junta. (Page 6)
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JAPAN: Recent nuclear tests may have ended chance
of
early Japanese ratification of the NPT. (Page 9)
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CHILE-PERU: Planned visit by Chilean air force
ch
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will lessen chances of an early confrontation.
(P
age 12)
FRANCE: Giscard announces new social program.
(P
age 14)
RHODESIA:
Prime Minister dissolves Parliament.
(Page 15)
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The Third Law of the Sea Conference (Page 18)
FOR THE RECORD: (Page 23)
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Balance of Trade
1965-1974
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National Intelligence Bulletin June 20, 1974
USSR
Unprecedented hard-currency surpluses in prospect
for this year and next will greatly strengthen the Soviet
bargaining position in economic negotiations with the
Western countries and in. economic dealings with Western
firms. Barring major shifts in trade policy or bad har-
vests, the USSR probably will earn annual surpluses of at
least one billion dollars in its hard-currency balance
of payments in 1974-75, following more than a decade of
deficits. Rising prices for Soviet exports of oil, min-
erals, and other raw materials, combined with a sharp
fall in grain purchases after last fall's record harvest,
account for the turnaround.
Using its monopoly control of trade, Moscow might
try to accelerate imports from the West as a result of
its improved cash position. But in the next year or two,
a large upsurge of plant. and equipment imports in excess
of planned levels is unlikely because of the difficulties
in adjusting plans and because of the long lead times in-
volved in carrying out large investment projects. More
immediate ways to take advantage of the position are avail-
able; the USSR:
--will not have to accept unsubsidized loans at high
interest and will bargain hard on non-credit terms,
--will pay cash for more of its current purchases,
--may postpone exports of some commodities--diamonds,
for example--for which demand is growing steadily,
--will have the option of reducing or even halting
gold sales.
Even with any plausible combination of measures to
increase imports and limit exports, Soviet authorities
almost certainly would still have to deal with a surplus
in the hard-currency balance of payments in 1974, and
probably in 1975 as well. Historically, they have not
held large hard-currency reserves, fearing devaluations.
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Rapid inflation in the West probably has increased this
reluctance. Nonetheless, the only reasonable option
available to the Soviet foreign trade managers is to
place these surpluses in their own banks in the West or
in other Western banks. More important, the new-found
liquidity should encourage Soviet planners to count more
heavily on Western machinery in framing the capital con-
struction programs in the 1976-80 Plan.
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National Intelligence Bulletin
June 20, 1974
The Lao Communists are still well out in front polit-
ically in the ten-week-old coalition government, but the
non-Communist side is finally beginning to show some signs
of life.
Aided by Prime Minister 5ouvanna's parliamentary ma-
neuvering, non-Communist: ministers in the coalition cabinet
have succeeded in at least temporarily deferring cabinet
action on two important proposals. Both were recently
pushed through the Joint National Political Council by Lao
Communist leader Souphanouvong, who chairs the Council.
One proposal, a comprehensive 18-point national polit-
ical program, sets forth. Communist domestic and foreign
policy priorities for the new coalition, The other, an
equally comprehensive proposal spelling out "regulations"
on democratic freedoms, lays the groundwork for a system
of press censorship. Both have been sent to cabinet com-
mittees for further study.
Non-Communist cabinet ministers have also been able
to parry Communist efforts to secure the new coalition's
recognition of the Viet Cong's Provisional Revolutionary
Government (PRG). The recognition question, which was
due to be discussed at last week's cabinet meeting, was
sidetracked, at least for the time being, by non-Commun-
ist delaying tactics.
Aside from their efforts in the cabinet, the non-
Communists are trying to organize a new, broadly based
political party--"The National Union of Peace and Recon-
ciliation." the proposed
party has the ac in of senior co rvative political and
military
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June 20, 1974
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URUGUAY
A new military decision-making committee, the "Junta
of Generals," has been formed as part of an accord with
President Bordaberry for greater military participation
i.n policy decisions.
a_n the
wake
of last month's internal army turmoil,
the military
has
persuaded the President to allow it a
more active
role.
The new system will depend on a con-
sensus among
the
senior officers comprising the "Junta of
Generals" in making decisions that will be transmitted
to the executive throuqh the three service commanders.
It will be their responsibility to present a collective
military view and obtain presidential acquiescence.
Bordaberry apparently agreed to this arrangement in order
to retain his position.
Consensus among some 20 general-rank officers, es-
pecially on sensitive and important decisions, will not
be easily achieved.
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National Intelligence Bulletin
June 20, 1974
The recent nuclear tests by India, France, and China
may have eliminated any chance of early Japanese ratifica-
tion of the Nuclear Non-Proliferation Treaty.
Japanese leaders believe the Indian test, with its
implications for further proliferation of nuclear weapons
among "less responsible" countries, was a severe setback
to the trend toward nuclear disarmament. The subsequent
French and Chinese tests have accelerated Japanese think-
ing about the problem, as have the recent US commitments
to provide Egypt and Israel with nuclear reactors.
The Japanese are also disturbed over what they feel
is an overly restrained US response to India's action.
They question the US commitment to the non-proliferation
of nuclear arms. President Bhutto's statement citing the
need for Pakistani nuclear development underscores to
many Japanese the danger that nuclear disarmament efforts
will be undermined in the absence of preventive action by
the big powers.
Two basic schools of thought on the NPT appear to
be emerging in Japan. One holds that Japan must ratify
the NPT or appear hypocritical for criticizing the spread
of nuclear weapons--particularly in view of Prime Minister
Tanaka's "pledge" earlier this year to secure ratification.
A more influential, though necessarily less vocal, group
contends that Japan cannot afford to foreclose its nuclear
options, at least until there is some new momentum toward
nuclear disarmament. Some members of this group believe
that Japan should never ratify the treaty.
There is no doubt that the Japanese feel less secure
as a result of recent nuclear events. This sense of in-
security, however, has been nurtured by other develop-
ments of the past few years, including growing doubt
about the reliability of the US nuclear umbrella in de-
fense of Japan, and an appreciation of the weakness of
Japan's diplomacy, which was brought home by the Arabs'
use of the oil weapon.
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A Japanese decision to opt for nuclear weapons cer-
tainly is not imminent. It seems clear, however, that
recent developments may contribute to subtle changes in
Japan's attitudes toward security matters. Recent Jap-
anese polls have already revealed a trend toward wider
acceptance of at least the possibility that Japan might
eventually acquire nuclear weapons. This does not mean
that a high proportion of Japanese actually favor acqui-
sition of nuclear weapons, but it seems to indicate that
many are becoming more passive in their opposition, per-
haps in the belief that such a development may be inev-
itable.
Some Japanese officials have suggested that if
Science and Technology Agency Minister Moriyama--a major
opponent of the NPT--is removed from office, the treaty
can be ratified in short order. The opposition of one
man, however, probably is not as crucial as these offi-
cials suggest. Japan's reservations on the NPT are
broadly based, and recent developments have only rein-
forced them. Thus, Tokyo seems likely to continue to
draq its feet on NPT ratification, citing various ob-
stacles, bureaucratic and procedural, but rarely, if ever,
mentioning the root problems: doubt about the wisdom of
foreclosing Japan's nuclear option, and doubt about the
international commitment to nuclear disarmament.
INR finds insufficient evidence to support the as-
sessment that the recent spate of nuclear activity will
significantly weaken Tokyo's determination to ratify the
NPT, although the recent nuclear testing, especially the
Indian test, has created some consternation in Japan.
Japanese officials have informed the US that, while the
change in the international nuclear atmosphere might
enable Liberal Democratic Party opponents of the NPT to
delay its submission for a few months, the Tanaka gov-
ernment shows no sign of wavering in its basic intent
to ratify prior to the NPT review conference in May 1975.
With the LDP leadership committed to ratification and
the non-Communist opposition and the media both support-
.ng Tanaka on the issue, odds are very good that the
bill will be passed by that time.
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CHILE-PERU
June 20, 1974
A planned visit to Peru by Chilean air force chief
and junta member General Gustavo Leigh may lessen chances
of an early confrontation between the two nations, but
probably will have little impact on the underlying sources
of friction. F -I
Both military regimes impute aggressive designs to
the other and tend to magnify perceived security threats.
Recent Peruvian arms purchases and the ideological gulf
between the military governments have recently combined
with historic Peruvian revanchism and the approaching
centenary of the war in which Peru lost territory to Chile
to create apprehension and spur contingency planning on
both sides.
Each side, however, has reasons for seeking a show
of amity. Chile is vulnerable to current Peruvian armor
and air superiority and needs time to modernize and ex-
pand its forces. Peru probably fears that recent expres-
sions of concern in the US and Latin America over a
potential conflict could jeopardize Lima's arms procure-
ment program and further isolate it from its conservative
1.,atin neighbors.
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National Intelligence Bulletin
June 20, 1974
President Giscard yesterday announced new social
benefits for the old and the poor in a program designed
to soften the impact of inflation on the least well off.
The measures follow his announcement last week of an
anti-inflation austerity program which placed the brunt
of sacrifice on corporate incomes, capital gains on real
estate, and higher personal-income brackets. Whereas
Giscard's austerity program had the bite of commitment
to it, his social measures, seen against a backdrop of
an 18-percent rate of inflation, amount almost to an ex-
ploitation of the inevitable.
Appearing again on television to present his pro-
gram, Giscard bestowed his first benefits on the eld-
erly--a staunchly Gaullist sector of the population.
Old-age pensions were raised by as much as 20 percent,
effective July 1. Although only half as much as his
campaign speeches promised for his first year in office,
it is the biggest increase in the minimum old-age pen-
sion ever made and represents a significant step toward
realizing his pledge.
Addressing himself next to a measure with strong
appeal for the left, Giscard announced a minimum wage
increase of 7.5 percent for the lowest paid workers.
This will raise the minimum wage 23 percent, compared
with July 1, 1973. The rate of increase is higher than
that of both prices and average earnings in France and
will bring the minimum wage earners closer to the aver-
age income level. Although this wage increase will be
a crowd-pleaser, it will not help in the fight against
unemployment.
These immediate measures were grouped by Giscard
under the rallying title of "change." Longer range
measures were labeled "justice" and aimed, in Giscard's
words, "at transforming the structure of our society."
Trade unions and employer organizations were invited to
complete negotiations pertaining to working conditions,
labor organization in factories, and collective redun-
dancy guarantees for workers. Research into setting up
a national employment fund devoted to guaranteed incomes
for the unemployed was also promised.
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Labor and management will be given a deadline, as
yet unspecified, to achieve concrete results. Failing
such results, the government will step in to take "such
measures as would seem necessary." In an attempt to head
off labor unrest, Giscard has given government blessing
to tough labor negotiations which would, in any case,
have taken place. At the same time, he has set up the
government as final arbiter in a game that will almost
certainly require arbitration.
Labor can be expected to protest that the social
program does not go nearly far enough toward easing the
belt-tightening they face as a result of the economic
program. Radical unions, although they can be expected
to encourage individual action to secure wage increases,
do not expect to be able to mobilize forces before the
fall. By fall, Giscard's policies may be bearing fruit.
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RHODESIA
Prime Minister Smith announced yesterday that he is
dissolving Parliament this week in order to hold an im-
mediate general election. Smith apparently hopes that
a fresh mandate from the! predominantly white electorate
will. strengthen his hand for a new attempt to reach a
constitutional agreement with the leaders of Rhodesia's
black majority--a prerequisite for British recognition
of his government and termination of international eco-
nomic sanctions.
Smith's Rhodesian Front Party now holds 49 of the
50 white seats in the Parliament, and a general election
is not legally required until April 1975. Nevertheless,
the prospect of early independence for neighboring Mo-
zambique has made Smith more anxious to end the sanctions
and Rhodesia's isolation. His latest constitutional
proposal, which would defer majority rule for at least
40 years, was rejected by the Rhodesian African National
Council, the largest black group in Rhodesia.
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National Intelligence Bulletin June 20, 1974
The Third Law of the Sea Conference
The third UN Law of the Sea Conference which opens
in Caracas today will try to formulate a new approach to
the use and exploitation of the ocean. The degree of
success the 150 participating nations have during the
ten-week session will depend largely on how they recon-
cile two opposing concepts--freedom of the high seas and
resource control.
For the principal maritime nations--the US, USSR,
and Japan--the old concept of freedom of the seas remains
central to their commercial and strategic concerns. These
nations control large shipping and fishing fleets, as
well as submarines and nuclear-powered vessels, and pos-
sess the technology and equipment to exploit resources
on the seabed.
On the other hand, the developing countries are con-
cerned about protecting what they view as their legiti-
mate share of world resources. They strongly support the
new concept of the "common heritage of mankind," which
would be applied to what were previously the uncontested
"high seas." The translation of this concept into some
sort of independent international authority for resource
control may be one of the most significant outcomes of
the conference. It may also be one of the most difficult
to negotiate.
The session is not one that will simply pit the haves
against the have-nots. A profusion of other groupings
exists with unique geographical, ideological, or commer-
cial interests. There are major areas of disagreement,
for example, between members of the so-called Group of
Five (the US, Japan, France, UK, and USSR). Fishing is
a prime example; it is a problem that divides even the
EC Nine. The major archipelago states, meanwhile, can-
not agree on a common definition of an archipelago and
its territorial sea.
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Demands by the Landlocked
Only the landlocked states present a solid front.
They are united in their demands for some sort of access
to the resources off their neighbors' coasts, perhaps
through new international machinery to secure a fair dis-
tribution of seabed resources.
The landlocked group is alone among participants in
having nothing to offer, except votes, in the elaborate
trade-offs that will be necessary at Caracas. Their
votes, when combined with those of other geographically
disadvantaged groups, number about 60 and will be sought
after. Even so, the landlocked may well find the support
of their fellow developing states for the "common heri-
tage" concept evaporating as the latter, trade recognition
for expanded zones of economic control for guarantees to
the major maritime countries of free transit rights.
The Economic Zone Issue
One of the most difficult issues facing the confer-
ence concerns the demarcation of the zones subject to
the jurisdiction of coastal states. Extension of the
territorial sea to 12 miles will probably be accepted.
For less developed countries, notably the Latin Americans,
who have unilaterally claimed seas of up to 200 miles,
acceptance of a 12-mile territorial sea would represent
a significant modification. Their delegations at Caracas
will not accept a 12-mile figure without assurances that
their minimum requirements on other issues will be met.
The Latin Americans and representatives of other
countries claiming extensive territorial seas will de-
mand, as the price for their consent to a 12-mile terri-
torial sea, agreement on a more extensive economic zone
in which the coastal state would in principle have total
control over all the living and nonliving resources. The
area would be based either on sea depth or, more likely,
distance criteria; the most common figure now being pro-
posed is 200 miles. The major maritime nations will
condition their acceptance of an expanded economic zone
on assurances concerning movement and access within this
zone.
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Pollution Standards Sought
Relatively few countries, however, are entirely oc-
cupied with their physical resources offshore. Spain
and a number of Caribbean countries, for example, depend
heavily on tourism and do not want their beaches polluted.
They argue, therefore, for the establishment and enforce-
ment by coastal states of pollution standards within the
economic zones, something the maritime powers oppose,
fearing an arbitrary exercise of these powers, possibly
for political reasons.
The majority of less developed coastal states, more-
over, are opposed to marine scientific research within
their economic zone without explicit approval. Some
coastal states consider that such research would cloak
espionage or commercial exploration--a prelude to exploi-
tation of seabed or shelf resources. These reservations
have not been assuaged by the promises of maritime powers
on full disclosure of data or joint participation by the
coastal states.
The technologically developed countries, for their
part, appreciate that a 200-mile economic zone would ac-
cord them certain advantages, but they are more concerned
that the sea lanes remain open and that their shipping
and strategic concerns not become dependent on a plethora
of conflicting jurisdictional claims and regulations of
coastal states. The USSR and Japan, in particular, are
deeply worried that wide economic zones will cut into
their usual fishing areas and that their fish take in
the zones would be reduced to the surplus remaining after
exploitation by the coastal states.
Fisheries
The question of access to fishing grounds and ex-
ploitation of fish resources may well become another ma-
jor issue at the conference. The lesser developed coun-
tries--many of whom depend heavily on fish for human
consumption--argue that complete control of the resources
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in the "economic zones" includes not only that of the
fish stocks themselves but also the right to set conser-
vation standards within the zone, including the estab-
lishment of limits on catches. Under this proposal,
fish stocks that the coastal state determines that it
cannot itself use would be declared surplus and foreign
fishing fleets could be licensed to exploit them.
Some proposals would give the coastal state various
forms of management authority or preferential rights even
beyond a 200-mile zone. Regional organs have been pro-
posed to manage highly migratory species of fish.
Fishing Access
Countries with distant-water fishing fleets--like
the USSR and Japan--find many of these proposals un-
acceptable, because they would limit access to tradi-
tional fishing grounds. The rich fishing states had been
inclined to consider some kind of international regula-
tory agency to set fishing quotas and conservation stand-
ards, but there has been a shift in recent months. The
USSR, perhaps resigned to victories in Caracas by the
poorer coastal states, is now willing to concede the
right of coastal states to set catch yields and to li-
cense foreign fleets to fish the surplus, conditional on
coastal state acceptance of other Soviet demands.
The USSR still insists that coastal states be obli-
gated to grant others access to that portion of the al-
lowable catch not used by the coastal state. Moscow
would prefer that priority access be granted those coun-
tries that traditionally have fished these waters.
Although the landlocked and other geographically
disadvantaged groups have demanded equal rights with the
coastal states to exploit coastal resources, the coastal
states themselves have until now rejected such claims.
The numerical strength of the landlocked may, however,
be crucial in shaping any eventual agreements.
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One of the principal demands of the developing coun-
tries in general, and the landlocked in particular, at
Caracas will be the establishment of some form of inter-
national authority to regulate the exploitation of the
deep seabed and to divide the revenues. The developing
countries are determined that such an authority be given
major responsibility for deep seabed mining, including
control over mining enterprises and apportioning areas
to be mined.
The US and the few other countries that have the
technology to exploit the seabed oppose giving discre-
tionary licensing power to an international authority
and insist that the primary responsibility for exploit-
ing seabed resources belongs to those with the technol-
ogy to do the job. The fears of some developing states
that increased availability of some seabed minerals
would undercut the value of their own raw materials will
add another dimension to the problem.
Archipelagos
How archipelagos and archipelagic waters are defined
at the Caracas meeting will have important consequences
for the issue of the transit of straits--a matter of con-
siderable strategic and economic concern to the major
powers.
The Philippines and Indonesia, the two major archi-
pelagic states, control most of the major shipping lanes
in the Far East. The two do not agree on the rules for
passage within the waters they claim. The Indonesians
advocate an "archipelagic transit right" which represents
a new type of transit regime, specifically formulated for
this type of geographical configuration. This regime
would demarcate specific "archipelagic sea lanes" within
which the coastal state would not be given the same com-
prehensive assurances by the transiting state as under
an innocent or unimpeded passage regime. The Philip-
pines, preoccupied with internal security, is demanding
adherence to an even stricter "authorized passage" for-
mulation, which would require prior notification of
transit by warships within Philippine waters.
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Cuba. Below-average rainfall could pose a serious
threat to the islands agricultural production. Rainfall
during the November-April period totaled only about 51
percent of normal. for the island as a whole? and was even
less in the two important sugar-growing provinces, if
precipitation does not increase appreciably during the
May-October growing season;, most agricultural crops, in-
cluding the 1975 sugar crop, will be seriously damaged,
The prospect of a, significant. decline in Cuban sugar
production in 1975 would exert further upward pressure
on world prices,, which already have doubled since the
beginning of the year to 23.2 cents per pound.
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