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Contents

\ ,_,. Yugoslu·ia: Situation Report .L .USSR: Situation Report. ·:·"'-- . . Jraq::Ku"·ail: Situation Report ._. Jsra~I: Warily-Watch fog Sou(her:n Lctfariori= ----, ..~···~-:--~-.---·-.·--··---·7 ··-- · ·· Peru: Treading Carcfull}' on Couritcrnarcotks Polic}· 8 · \i . . . ,.. - ·. : ..• , ._._..,..._ :..-- ...... ·: - .

Notes 9-- 9'-. -..ii!Ji-~~~~~~~~~- .J 0' 10

In Brief -·· .. 11 Spedal Analyses - ..,...... ,..-_' [ - ..-..i b (1) b (3)1 C :...• Iraq: Failing Marks c:m-G:'W Inspection · ..... ~ IJ ,~,:_·::... .· I ·r:~l•111-'--~·b_c_t·'-· b_ .. <~3.__>· : ______._14 ·• t]SSR~Cuba: Trade and Ec_o~nomic 'Alq ·_oeclinirig ·· 15 . ::.:\".,"\...... · ., . ~ ,:...... , : ~- .·__ ---o.-j .. ,- - ..

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.•z.,; •• CROATIA

I : Adria{ic 1-:"> \ \. · ..._: ,· ~ ·\ ,,~ Sea Italy··.-

- L.,, ·. ·.' -i;-..:. .Reputllrc bounaary Aut~nomous ·.,-•• b•un~al)" ~ C> ·, Re,u1bhc or •Ytonomoua area c1p~l•I

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"_""':--·:

The-Neth~rlands~ current president of the-EC, issued.a st~t~mcnt.on betialf-0fth~ Community yesterday that urged all parties to respect the ceasc-fir:e and refr::iin from_ ·violence but did riot call for- Yugoslav unity. Most EC members have indkated .tfiey will resist even oblique·criticism of Slovenia or Croatia.at the CSCE meeting in P~ague foday:

-·...... :·· .;,. .. : . ' .. - t· __ ---- .. · -- -____ ------~----·::.._ ___- __ ~ ...... ,.-.... - ---. ··-:- .... , -··-·--~,,..--"- EC actions in Xugoslavia have been an-unprecedentedly Qirect Com~unity.engagementin a : :-· foreign dispute, and that involvement appears set td deeper1:-Geririaii Foreign Minister'. - ·· ·o-· • · Genscher proposed -611 Monday that the EC send civilia11,observers to monitor the cease-fire . . an_d ~roopfwit~dra;v~I~~ The.'o~hcr Ilffi~er..ibersBolfthde Ec· bf. . d'Lh~vbc _agreeddto send a . _··_b· c·~-)· · m1ss1on .o senior ~ore1gn mm1stry_ o __ eta1 s tQ e gra .e. 2 agre , an _ JU 1.1ana to ay to .:>

prepare ~he way .for the obser_Vers._ Dutch For:igri ~inister vfn ~n Brock plan_s ~o req_u~st ~- ---- n -----·- - - • thbat CSLf": sa T_lctlo~ thh_: obsed[Yers'. ~om~dcGS~~ 1:11e!l}~e!" _, _lt)support· sfiedndmg rruhtary ·' .. _.•·b __ ---_._(_ ).· __ ·· ·-- o servers m 1 me wit proce ures spe1 le out;,_m 1asi-year s agreement on con ence:- and 3 security-building 111easures. ·· · ·- · · - , · - · · / 0 -·-:~:-:.: - - Slovenian and croatian leaders h~ve t~quest~Joreign ·mffitary and civilian ob:Senrers to· monitor the crisis, and' PrcsiQen~~Mesic ans!.Ppme·Mlnist~r Markovk have h_in_ted they would agree.to such· a presenc~;.:: The beleagu.~~ federal Army may also-be w11lmg tc.-.accept observers in order to discourage attacks b)'. Sla'Venfan and Croatian ·territorial forces as its· . ., . lfroops attempt to return to-their garrisons.~:..~.;,--:. . . . . -'. . ·'- -,~ ·:. ·.;-· :_. ·\ .... _, --. .",. ·: - ...... -· ,:,. ·.. :. . >-:-~---- .. . ~-~ ti(sr' ,' L ·. _;_ '·( -:--- .. ,,_ r_:>-.:...-~-:-. - .: __ . ~ .. . ) ·-

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b (3)

~·uGOSLAVIA: Situation Report ' - . Yugosltn•-po/iticians appe(lr to, be shifting toward recognizing Slo•·eni11n' Independence, but militlll)' attitud.es·are less clear; commanders are ~=~:7;~1lbf{:o»e~a~)c'.i~ns a~~!"~!l~ .f!ro({dening ~°.nfli~t in ·.· ,,. -· ···-

. . ; ...

Slo,·enian Senior Serbian officials yc:Sterda)· urged,~~.:: fdcral government to Independence accept Slovenia·s independence and .calied fo; the rciurn from Gaining Ground Slovenia of Serbian conscripts. Parents of Serbian contcripts stormed - the republic assembly to demand thei• sons return' within four days. The leadership of Serbia's an:)· Montc.""egro has concurred that disintegration is inevitable. condcmn·.:d the use of force, and called for recognition of Slovenia as a ••foreign state." The-_Macedonian . government has told ·the Army no more recruits or reservists will be allowed to ~c:ave. the republ.ic. an~ Basnia~-leaders havc5o~cmned Army.mob1hzauon efforts in their r:epubhc. ( I : \"I ·

-;,. .~nger: in the . ::\ lilitaiy lncre~sing b (3) '"-''·'·

. ' ~~'''~"''""" .. ::.::;. ' . ~,, . ",· ·.. ·... · 3 · rnlY leaders are increasingly angry and humiliated at :~~.JJ:~t;t~cir fai ur~ to acI:ifo,:"c even limited objecti:v,cs, inability to return ,''\:' ';\'.')f !l-~c~r units safel);-to their gar~i~ns, and w~a~ they see ~s ~lovenian

\ -~ -~ comFnued

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b(3)

violati0;is of the cease-fire. They could ti):· to escalate thc.conflict:in ~ .--: ·' de.spite the sa&g..i!1···a.r.1 ..1 e. their fo...... )? .. ' ! mchnat1ons~lo':eni~ of most pohap~a~c_ntly~ t1cal leadCfS_• . , .... ·. : b.~f. (3) .··rc~.5. ..• . ~· l"l.~~: : .. ·.~L.,,,:.,:, . · · Army Problems in ' ·, . • ' . :·:--- , -~':¥~~:'.:::".::~;~.:·~--'.' ~ ·":'::::.'~":"··:;:.~:=-:::=~~:''.'.'~;~ ~::~:. Croatia · ' Protesters in Zagreb yesterday thre~molotov cocktails,~t.fed¢ral · · tanks they believed were heading for ~lovcni~ and 'froops,fircd "j 0 t~~ ~rowd, killing two anc:t wo.unain1r othe_rs~ ...... (Sf·------· c1t1zens have erected bar:1;1cades around the Zagrebgarrison. 1v1 1a s ... in another large garrison townblocked a column of federal tanks_ : withotit reponed blOodshed .. Croatiari leaders said the.'republic'docs not want war with the Army bunhreatened to reconsider ifattacks on Slovenia: contin•Je. Ethnic violence contiilues in-Serb-po I b(1) bJ~;," ·-=· . .. ,. .. .. -· ··. , .-.· ... b3 ...... ••conl'!;d inCroatia,:whc;;~:popular hostility toward the ArmSr ma:; be beyond the control of the leadership. could be much more dangerous than in Slovenia. A.confron·tation in Croatia would . face the Army with battle.;astnde 'its supply.lines to Slovenia...... Resistance mi&!tt.!?e_:!~ss weJtorgan_ized than in.S.loveriia,.bu,t.it would be-more vicious b~cause Croat-s~ee the Army as the too~ o(t,heir. · .

. Anny has been unable to-maintain .order., ...... hnostthe . b{1) b (3) cenainly are made up largely.of Serb ~roop·s after recent reserve . a~liif§bibly ~~.:~-~o,re :,~!iabl~ than t~ose in,Slovenia. b (3) ·irMYt ' ·~,.·· - -_,, ., ~~~':::::..', .·. >.,._: . . . - -...... ~ -...... _ ' '- .-. : : ·. ,,,,: ,__ .. '"\...., ''t ' \!-~--~~'.\" ...... ~. 1\ " :c):· ~ .. ,·,, .\

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b'3

USSR: Situation Report . The center has mo•·ed to contain blq_ck•/Hret actions in the Baltic: -· republics, R11ssia has upped the ante.. f!n. eco·,·""~.·.. issues, a. n.d the Communist Pll"!J' is talking about -r_efornfin~.~- · t3 • b (3) . .. ' ...... Black Be1et . - yesterday. General Kalachcv, the ch.lcfof . Commanders in . the Main Police Directorate of the Interior Ministry (MVD), said that \'ilnius )leprJmanded the center did not sanction the recent black beret operation in Lithuania and that such actions would harm Soviet foreign policy interests and ·make things worse for in the Baltic republics: He wam.ed that officials res onsible for further·such actions would be b(3) dismissed. ,. Vilnius military garrison commander and the B1:dtic iv1s1on commander-have been transferred. Kalachev also said that Colonel Goncharenko, the MVD .~ representath·e to the Baltic repu~lics _an.d+] . !ff! an activist i·rt'ihe b·.(a) procenter In_tcrfront movement m Latvia, woul . : .. cad a newtf~~\lP stationed in :Riga to co~t~oJ blac~ beret acth'ities. . \ 1 I) (3) UfJW'fb t I he tran~fer ~ft.h~ two ~officers and the sharp criticism oi­ ·. . . · local blac:k beret leaders proba6ly was meant to show Gorbachev's · : commitment to restraining violence and to reinforce the center's . · · ·control over units-in the Baltic region. but Goncharenko's · appointment suggests tfte-c;:.enter will continue its low-level harassment of the Baltie ·republics. b (3) . . ' . . ·.. ~~~~-.... - ' ': ~ ' .. Ne~'" -Center At a recent sessfoh'of'"th~ssia~ Repubii~ ~ui)rerne Soviet, Russian · Tension On!r . Premier\ivan Silayev'announ~d ,that th~ republic would soon take -'"Economic Issues jurisdict~on of all enterprises on its ,~erritpry to prevc nt the center .·. from ret.aining a~5.ontrolling i~terest iin -~wly,creatcd joint sto~k . ..-.' COQlpan.ies. Ukrat'n,e, Beloruss1a, and.;Kazakhstan have takon s1m1lar steps in recennveeks. Sifaycv also said he had recently written to the central go,'ernmcnn,rotesting new union customs regulations, which . he charges tax enterprise'hard currency earnings stiffly and limit the republics· ability to conduct fpreign trade -independently. He also noted that'\the Russfa.n ·Repubfic would challenge recent union legisl~tiou that appears' to reduce Russia's'.rights to license export ' , ofits~~oducts, indud,ing oil an~.gold. IJ ..JJ. b (3) · b (3)·: _., . _,1 gp IJ I Silayev apparently believes that recent central government 1:''r·: :\~~asures. partic_l1~arly decrees of the Cabinet of Ministers, are an ·;"y· ' ),effort by traditionalists to reintFoduce greater central control. Many ·..;..'dem.C;>cratic reformers will see measures such as the new ..customs ... b (3) 3 :.,_-" 'vc-;.'~

. . . - .; . . -~· '_ '."" ..... -- . ~ - - - - . ~ . b(3f b3 ·~' . . . 81:··_

codes as b~cksliding ~n ~oncessions to_ the republics in the draft union .treatyandth.·c- anticrisis p_rogr.:im·•;·i. h_cy. p.r ob. ab.. Jy .. wiU.· inc.rease p~.s. c ----.--··-··--- -.- _ on Ycl'tsin to pursu" a poHcy m:t•~:~odc:~ O~the~cnt<:f: ~~!JJ~L CPSU Platform ------·:· ._-. --:·· '_ •····_-~-- -·: '·,":·:· -_:-'-'------:Co<-- - '--·- -- - .. ------'7"------·~ ------·- -.--;-·-7"·'--::-:·--·-:----~-- -.------Emerging Amid Commun iSt Partv leaders announced Monday that a party congress , .:- ..·: Party Turmoil or conference wiil be held late this' year or early riext year to discuss_:~------~~-: a new plat.form_ ... ,, L - 11 . JZ ; -n a Cc-iifraf Commince_ . _Jj (3), plenum will be h

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Nuclear Inspection Update The UN inspection team composed of International Atomic Encrg}: Commission chief Blix and nuclear inspection team leader Kay inspected equipment at Al Fallujah yestcrdav morning..... Ii••• M I · 71 'F :The delegation plans to fly to G!!ncva toda~· to briCfthc b (3)~ I }t!;, ;~c~~~~·:;o~,~~~::'~ct~J~~~~~.~r;;::;-:!d~~f:'(lib ''t:83't' the bh ~t>:9' ,--XJ(,...... _-LB- t?JtpI

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b(1} b(3)

•. - b (3) .<~?~ ..... ~-- ISRAEL: \\'arily "'atchh'a.' South~::: .Lebanon

......

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Comment: Tel Aviv probably does not expect the Lebanese Army to trv to move into :.-raeli-held areas in South Lebanon before it cstablisfies firm control over the Sidon area, which may take weeks. _ In any event. Israel probably believes sporadic Palestinian and Hizballah attacks against its forces will continue to justifv an Israeli i .....- military presence in southern Lebanon. .. - -· J .. .. • • ~ .. • .. • ,..,,,.., ,. ... :l) .... 0

7 •3 July 1991 •

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b (3)

PERU: Treading Carefully on Countermu:..cotks Polic>'

-~ '·, • • ··- ~- <'··· • • .. '. .· .·· ·.. ·. -•." .. 'I Peru has increased a fe.t· .antidrug 'Q~rations in an attempt · b { 1) b. (3) , . .. .but the Fujimori af!mini,stration is hedHfns on public.· . .·. . ' com!"itments to joint drug conirpl~fj->rtf.· .!If··., ·b1\:j)··7 ~ ... ,::._:.....::.::...... :...:::~-~ ..~ .. The Peruvian Air Force lat~.iast month ~xpa~dcd its air i~tc~dictl~~ ~ ·~ .. campaign, using us~supplicd data 'in fordng doY.·n _· SUS. ccted . I ·. dru ·trafficking aircraft; two others evaded ca

! \ ...... ,.,.. ·...... :. .. ' . - . -:.-'.. . . ·.- ·.: . ~ ·. . ·.. ::.. . . . -The Defense fyf inister. ho'!_Ve,ver, has publicly emphasizeci u1at the military will not directly· panicipate in antidrug operations. In the hope of avoiding .. thc Kind-of public criticism sparked by the· .· · .. counternarcotlc~ agreement ·s'ign-ed with the US in May, President·. Fujimori is also tr)·ing to remove performance requirements-in such areas as antldrug, human rights, and economic refo m-from ~,f ' 1· pen din military and ec:Onomic aid accords with the U~ I I f!JJ_ · "' '\' 1{!11 491 Fuj~~~ri, anxiouus'fo q~~~h ~~~g.es .tdhat he !s md.ilitakrizi,rig' ~.:i t. e an.tr. rug euort, .under_ 5 pr~ssute, a~p'ears etcrmme_ to·· eep , ~ econom1c development-at-the center ofh1s counternarcot1cs program. The government wllfbnJy·reluctantly involve the Anny, which is eager to improve its lackluster counterinsurgency effort in coca­ growing areas. Lima's claim last week Jo have discovered a formal pac. t be.. t"i.'ecn ~enderO·Luminoso insurgents and narcotics traffickers, however,:Jwould enable the government to cite a terrorist threat to· · just._tfy~e forceful antidrug operations. In any event, pervasive ·. nar~otics corruptio~nd polic•1• rivalry will continue to hamper ~f~~?i<\\ :nudrug programs. 4• llJ 11£•••••, ·· b ,(S) . :. ', i \'' \ '!j I I I ' .,.. ... \. \. ~

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--::_"". CHINA: Trying To Spur UN-Sponsored Cambodia Settlement

Beijing recently has shown some,fl~xibility on a Cambodi•1 settlement

17 :SQ ..Beijing prnbably h'as been concerned that the UN peace · proellf?as losing momentum and t_hat countries such as Japan and France were exploring other c.~·cions. China may also be trying to . appeal to Hanoi's shuffled leadership and to win favor with the US Congress during debate over its most-favored-nation trading status. -China nonetheless will resist anv changes to the draft face plan that •'i'Yf f~th~, Sc~u~i~y Councg s~_ttlcment frameworkf T 71 b {3)' I . "' ' <: - . b(3)

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b(3)

In Brief ... / .....

• ,Y • o • • •

:\liddlc East . '

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. -· Iranian Foreign Mini~ter Velayati arriv~d fo Fra~ce yesterday to~ .•sign final settlement of longstanding financial dispute ... probably :' r?mr5 warmer relations,_ possibl~ M.i.tterran~ visi~ to Tehran. • b (3) . . . . ~. - '• - -Sudanese re.be! leader G~:~ deputies voicing.sentiment for b (3) - seccssiori, . ., 7 F JI MEAt~ . frustrated by hardline Islamic .- government, loss of Ethiopian ·support·~ : . probabl~· encouraged by . . . Eritrean, _soi:ri~lil~?d inp.e~~~~?ce(ieclarations. •z b {a) .

Asia .-:_ "''"~ 1.e2 .'. I I ·--=--. . }:)(.

·''.,."· .·_}'!' .~ Fijf G~ve~ntl1~ktl6-i~~ 'i6 app~a~~ ~~ i~~s by• ~r~p~~ing proposed ·.· value-added-:tax~-si:>ftenlng antllabor decrees ... unions still plan nationwide strike 16)uly ... military chief Rabuka supports Suva but sympatheti: .~~.~~~on ~emands ¢_ ?l[g b (3) . 1 USSR --Got1il;~J~c~ a~d·e Pr1~~akov arrives in.. lap":'n tomorrow ... se~king support fo:- atd request at G-7 summit this month ... may discuss - new ideas for resolving Northert\..'Territories dispute, SOl'iet . ~~·~t;\'\t- i President's -~e~9rtcd dir<:ctive on ~mpro~·.ing rclat_ipns. ' illt/k, b {3) i - .. ,. ., . 1\',,, ':!J 1 -~- ~ ~ ·- Europe . :·;~·,~,_;_. \ - - Walesa ad.Pressing NA TO tQ,4ay seeking assurances Alliance .. 12·· ': '· _1 understands Poland':t-.posf..;.Warsaw Pact security concerns ... -... i~.": ' . t'. \ ". . \ ,...... ~ /'--- • . : ~-...!.. -~~~--. -...... ,.. . . : ; 1-=t ··. 8 • - w - .~ - - _· ':" • • • • • - ::> _,~,._ .... D.:J~f ...... : ·-...... - ·. . . - ,,. . .- .. ·~· ...... ~

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Soviet Trade With Cuba, 1985.-91

/lillio11 USS - - Other exports D Oth

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4

-... --

0 ,, 198,S 86 lj7 88 89 90 91 - . Eslimatcd For 198..'i-90. Soviet trade data have been _c9nvcrtcd at Int: official rublc/dollur exchange rate. The decline in trade in J 991 reflects tire elimination of oil and nickel subsidies. lower pricci. far sugar and oil. and reduced Soviet cxpons oi mach.ini!ry and equipment.

-.:.._

USSR: Economic Aid to Cuba/~85-:9J .\fil/io11 l'S S I. -~--...... Total tk\·clopmcnt/Trade Price Credits Subsidies 1985 5.300 1.055 \ 4.245 1986 4.335 1.590 2.745 1987 4.98"5 ·l.760 3.225 1988 4.500 2.015 2.485 1989 4.765 ::?.130 2.630 1990 5.190 1.890 3.300 1991 • 2.560 1.240 1,320 •Data for 1991 a~~pi'Oltfufil°ary and reflect aid lc\"Cls C'11kd for in '1grcemcnts b.changc rate; the \"olumc. ho..,·-cvcr. dc.:lincd.

:.~i1~UUllJilflJF b (9) ' .

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~--...... -..------·~ Specia! Analysis USSR-CUBA: Trade 11nd Economic Aid Declining - ' . . . . - / --- . -- - . -Trade ond ~conomic ·aid floH·; b~l~·een···~he -ussR·Q,;,ti·c~bQ-h;~,~ ~ ------·--- ·---~-----.---- dropJWd sharpfJ' this year /Jeca11se of1tconomic turmoil in tke USSR and 's efforts to r~duce_ the costs o/supporting.Ha••ana.-The :_ Soa•iets probably K'il/ ha•·e dijficultJ' meeting a/read)' reduced 1991 - com!_il.itments desp_i~ ej/orts to resob·e current trade pro~/ems. ti•••• ... -- b (3) -

· behind schedule because-of Soviet shipping problems and Cuban·:-_-·-. · - ~- ·'._'~ · ._ retaliation for so.. ·iet ·deliVery'shonfalls. The larger drop in trade is mainly due to the turmoil in the Soviet econom·y, disputes over prices ;:~~e;~~~~:~ s~:i~ta~~~~fe~~-w>ns t" th~ ~)ban economy resulting

.~ - .. ~..... -;- -~ ...... :. ~~ ••.-·· '. '~ ' '" ;_~ ...:-· ' ~"-.:" ....~ ) -·· /'. ~- l "',-, l • 1, • - • .. trade house" to facilitate transaction~ with Soviet republics and enterprises, although this trade house-will not be operating soon. · · . ·a· .J II 9 ·· · · _ r · H U_ 9 T~ese ~nitiatives may -l'ev1ve bilateral trade :somewhat, but relauons will still be' hampered by economic' prob1~sjn ~ac}t cc'.>untry and by Moscow's inability to sustain a high IevCl·ofaid. Soviet leaders probably will want to continue extending some aid to H~vana despite \\lestern calls for further cuts and d()m~stic opposition to· foreign aid, and even some r formers sec,t.h~ strategic benefits of friend . with Havana~ b (1) b (3) b(3) Moscow's preoccupation with So:\tiet economic problems makes it unlikely that increased Westem'aiet to the USSR will prompt higher resource flows to Cuba. Hard currencv loans to the USSR, for example, will be used to a'<•oia defaulis on Soviet debt and ·to finance Soviet imports. The Soviets historically fiave provided only about $300 milli~n ~ -y~ar wo.[!_h o_f ~ard. currencys~ppop.-t~-usually to ju(' i~am-=;~~)of $4-5 bilhon m total Sov~et a~d.~ b (~) <__ -~ . --,~~~ Is ..