PHILIPPINES: MIDDLE EAST DIPLOMACY AND MARCOS S SAUDI VISIT

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83B00227R000100120005-1
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 15
• Document Creation Date: December 19, 2016
• Document Release Date: February 14, 2007
• Sequence Number: 5
• Publication Date: March 1, 1982
• Content Type: REPORT

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Intelligence
The Philippines:
Middle East Diplomacy
and Marcos's Saudi Visit
An Intelligence Memorandum
Secret
EA 82-10040
March 1982
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Directorate of Secret
The Philippines:
Middle East Diplomacy
and Marcos's Saudi Visit
Information available as of 12 March 1982
has been used in the preparation of this report.
This report was prepared byl
f the Malaysia, Singapore, Islands
ranc out east Asia Division, Office of East
Asian Analysis. Comments and queries are welcome
and may be directed to the Chief Malaysia,
Singapore, Islands Branch, OEA
This report was coordinated with the Offices of Near
East-South Asia Analysis and Central Reference,
with the Directorate of Operations, and with the
National Intelligence Officer for East Asial
Secret
EA 82-10040
March 1982
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Secret
The Philippines:
Middle East Diplomacy
and Marcos's Saudi Visit
0
Summary President Marcos during his visit to Saudi Arabia beginning 19 March will
seek Saudi understanding and support for Manila's position in its long-
standing dispute with Muslim rebels on the Philippines' southern island of
Mindanao. Favorable Philippine-Middle East relations require at least the
appearance of progress by Manila in meeting the needs and demands of the
Filipino Muslims. A successful Saudi visit would further improve already
rapidly growing economic and political ties with the Middle East.
The Philippines' Middle East diplomacy is aimed at reducing the vulner-
ability that results from the country's dependence on the Persian Gulf for
half of its oil imports. With the intensity of the Muslim rebellion abating,
Manila is expanding lucrative construction and labor contracts throughout
the Middle East. In addition to strengthening ties, the remittances of the
workers ease the financial drain of an oil-import bill approaching $3 billion
annually. Marcos and his business asssociates have personal stakes in these
ventures, focusing the potential damage from economic sanctions on the
President himself.
Protection of these financial interests has necessitated compromises in
Philippine foreign policy. Although the Philippines is still likely to support
the United States when major differences arise between Washington and
Arab governments, Manila is now more inclined to vote with Arab states
on the Arab-Israeli conflict. It now supports the Saudi peace initiative in
the Middle East and recognizes the PLO as the legitimate spokesman of
the Palestinian people. The shift is likely to become more pronounced and
extend to other issues as Philippine economic and political ties to the region
grow.
iii Secret
EA 82-10040
March 1982
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The Philippines and the Middle East
Boundary representation is
not necessarily authoritative.
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Secret
I 25
The Philippines:
Middle East Diplomacy
and Marcos's Saudi Visit
0
The Diplomatic Because of simultaneous Philippine oil dependence on the Persian Gulf and
Offensive links by Arab governments to the Muslim insurgency on the southern
island of Mindanao, sudden policy shifts by Middle Eastern oil states can
cause Manila severe financial and political hardship. President Marcos's
visit to Saudi Arabia this month is being made in an attempt to bolster the
Philippine end of a relationship heavily weighted in the Arab's favor.
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To reduce the likelihood of sanctions, Manila in 1976 agreed to grant
autonomy to the Muslims on Mindanao. The Tripoli Agreement, signed in
that year, has become the yardstick by which OIC member states measure
Manila's willingness to live up to its pledge. The Agreement called for a
ceasefire between the MNLF and the Armed Forces of the Philippines and
became the basic framework for continued efforts to end the rebellion.
Manila, however, has been reluctant to relinquish complete power to the
Muslim regions of the South or reduce its control of the mineral resources
in Muslim areas. Because of Manila's only partial adherence to the accords
and its limited success at political cooptation of the MNLF, the ceasefire
has gradually broken down. Fighting, however, remains at greatly reduced
levels from the high point of the early 1970s.
When measured in terms of expanded bilateral ties alone, the diplomatic
offensive has produced impressive results. Since the mid-1970s Manila has
opened embassies in Jiddah, Abu Dhabi, Kuwait, Rabat, Tripoli, and
Baghdad, and it now has diplomatic relations with all 22 member countries
of the Arab League. While the OIC continues to be an important
international supporter of the MNLF, Manila has been able to forestall
economic sanctions, even though individual member states from time to
time have threatened punitive actions. Furthermore, a divided MNLF
leadership combined with competition between the radical and moderate
wings of the OIC dims prospects for unified Arab support for the Moros.
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Economics and Oil
Diplomacy
The Philippines: The Economic Connection
Middle East
Saudi Arabia
Kuwait
Iraq
Oman
Iran
Dubayy
Other
Total imports
Value (billion US $)
1979
1980
1981
136,700
154,600
139,170
66,000
98,000
110,000
31,000
29,900
18,100
33,000
22,700
0
0
4,000
7,500
6,700
0
0
0
0
3,570
63,300
65,400
70,830
200,000
220,000
210,000
1,385
2,248
2,800
a Including crude oil and products. About one-half of oil deliveries
from the Middle East are on government-to-government contracts
rather than from private firms,
"oil tribute" now costs the Philippines nearly $5 billion annually.
Manila's economic concerns remain the driving force behind its diplomatic
efforts in the Middle East. Dependent on Persian Gulf suppliers for over
half of its oil supplies and two-thirds of its oil imports, the Philippines, for-
eign trade gap with the Middle East has grown rapidly in the last three
years. The 1979-80 round of OPEC price hikes escalated the country's oil
import bill from $1.3 billion in 1979 to about $2.8 billion last year, sending
Manila scurrying into international capital markets for financing. Includ-
ing debt repayment obligations on previous loans to finance oil imports, the
on these benefits, Manila in 1981 concluded labor contracts committing
Manila has adroitly eased the financial drain by encouraging labor exports
(over the objections of a local foreign business community deprived of
skilled workers) and securing a lucrative portion of the Middle East's
enormous construction business. As of December 1981, Philippine firms
had obtained nearly $2 billion in construction commitments, including a
highly publicized bid to build a $300 million trans-Iraq highway linking
Baghdad and Kuwait. Approximately 250,000 Filipinos work in the area,
including 130,000 in Saudi Arabia, and they remit over $300 million
annually to the Philippines through the Central Bank. Remittances
through unofficial channels may be even larger. Eager to capitalize further
roughly 80,000 new workers to several countries in the region.
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Total overseas
1,300
Seamen
250
Expatriates
800
Middle East
250
Of which:
Saudi Arabia
130
Iraq
15
Libya
15
Official remittances c
Million US $
(1980)
648
Total remittances
Remittances from the Middle East
(1980)
300
a Including equipment purchases and local services.
b End of year.
Cleared through the Central Bank.
Construction Contracts a
Million US $
Total value b
2,000
New commitments, 1981
782
Of which:
Middle East
625
Iraq
250
Saudi Arabia
208
Libya
143
Kuwait
24
Not surprisingly, Manila regularly cites the Middle East construction and
labor export business as its most tangible progress in combating a weak
balance of payments and high domestic unemployment. The government
also uses these claims to bolster its domestic image as a competent
economic manager, although the actual dividends are somewhat more
modest. The Philippines' Middle Eastern labor force, for example, equals
about one-fourth the number of domestic workers unemployed and repre-
sents about half of total overseas employment. Remittances from expatri-
ates working in the United States, moreover, at about $450 million, are
considerably more important for its balance of payments.
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Middle East Banks in Syndicated Loans Official Loans and Grants
Arab Banking Corporation Saudi Arabia Monetary Authority
National Commercial Bank (Saudi Arabia) OPEC Special Fund
Kuwait Asian Bank Kuwait Fund for Arab Economic Development
A Compromised Marcos is well aware of the cost in lost worker remittances and economic
Foreign Policy disruption that could result from Middle Eastern discontent over his
domestic Muslim policies. For example, Iran shut off its oil sales to the
Philippines abruptly in 1979 and expelled thousands of Filipino workers
after an alleged massacre of Muslim rebels by Philippine troops. The
Saudis threatened not to renew government-to-government oil sales in late
1980 after "unhappiness" over Manila's treatment of the "southern
question." In both instances, diplomatic efforts succeeded in replacing lost
oil, and the Saudis were even persuaded to increase oil shipments to replace
supplies lost because of the Iran-Iraq war. Nonetheless, Marcos was
pressed to reassure both private foreign bankers financing Philippine
economic growth and a domestic commercial audience that economic
disaster was not imminent. It is a public relations exercise that he does not
relish repeating.
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Outlook for the Despite its generally effective diplomatic effort to date, Manila is not
Muslim Question optimistic about its ability to completely eliminate foreign support for the
MNLF. At the very least, Marcos expects radical Muslim states such as
Libya to continue ivin moral support to the Moros
Marcos recognizes that substantial increases in external aid for the
insurgency could produce an upsurge in fighting that would strain Manila's
own financial resources. Although the Moro rebellion is now not much
more than an irritant to the government, any significant increase in
fighting could severely hamper Philippine efforts to counter the more
serious Communist insurgency, because fighting in the South would
necessitate redeploying forces currently fighting the Communists back to
Mindanao.
Marcos may have another compelling reason for a successful resolution of
the Muslim question. Leading opposition politician Benigno Aquino met
with MNLF chairman Nur Misuari in 1980 and again in 1981, raising the
spectre of a possible coalescence of Marcos's opponents. Aquino is rumored
to have set up another meeting with Misuari prior to Marcos's departure
for Saudi Arabia. While a Muslim-Christian coalition is unlikely, Marcos
would be anxious to prevent even a tactical alliance which could give his
domestic political opponents access to foreign military and financial aid.[
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The Economic Factor Over the longer term, Manila could reduce the leverage of Middle Eastern
Middle Eastern oil to any meaningful degree during the next three years.
to turn away any potential suppliers of oil. Marcos's advisors have told him
that the glutted international oil market is a temporary phenomenon and
that he should not expect the Philippines to reduce its dependence on
took advantage of its high level of oil stocks to terminate a contract with
Kuwait for 15,000 b/d in fuel oil supplies. Nonetheless, Manila is reluctant
30,000 b/d of crude petroleum beginning in 1981. More recently, Manila
states in influencing its foreign policy by diversifying sources of oil imports.
The visit by Imelda Marcos to Mexico City in 1980 was a step in this direc-
tion. At that time, she obtained Mexican pledges to provide as much as
Manila's sense of financial vulnerability will persist well into the 1980s in
business associates will remain victims of their own financial success in
dealing with Middle Eastern countries. They will undoubtedly want to
avoid any disruption of these benefits, and this will continue to influence
any case. Even if the Philippines diversifies its oil supplies, Marcos and his
Philippine foreign policy as long as Marcos retains power.
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