EXECUTIVE INTELLIGENCE

REVIEW Oct. 30-Nov. 5, 1979

The end of the Camp David era

New Solidarity International Press Service $10 [THIS PAGE IS INTENTIONALLY BLANK] Edltor-in-chief: Fernando Quijano Editor: Linda de Hoyos Managing Editors: Kathy Stevens, Vin Berg Production Manager: Deborah Asch Circulation Manager: Bonnie Silver

Contributing Editors: Lyndon H. LaRouche, Jr., Criton Zoakos, Christopher White, Costas Kalimtgis, Nancy Spannaus, William Engdahl

NEW YORK BUREAU: Nora Hamerman, bureau chief Africa: Douglas DeGroot Asia: Daniel Sneider Counterintelligence: Jeffrey Steinberg Military Strategy: Paul Goldstein Economics: David Goldman Energy: Marsha Freeman Europe: Vivian Zoakos Labor: L. Wolfe and M. Moriarty Latin America: Dennis Small Law: Felioe Merritt Middle East: Robert Dreyfuss Science and Technology: Morris Levitt Soviet Sector: Rachel Douglas United States: Konstantin George United Nations: Nancy Coker

INTERNATIONAL BUREAUS: Bogota: Carlos Cota Meza Bonn: George Gregory Brussels: Christine Juarez Chicago: Mitchell Hirsch Copenhagen: Vincent Robson End of Camp David Mexico City: Robyn Quijano Milan: Muriel Mirak Paris: Katherine Kanter and Sophie Tanapura Rome: Claudio Celani What next? Stockholm: Clifford Gaddy Will the British and their Carter regime in the United Washington D.C.: Laura Chasen States lose all control over policy developments in the and Susan Kokinda Wiesbaden: (European Economics): Middle East? The resignation of Israeli Foreign Minister Mark Tritsch Moshe Dayan-"Mr. Camp David" in Israel-not only sends Israel in an uncertain direction, but confirms Arabs, Jews, and the world in the belief that U.S. policy Executive Intelligence Review is published by New Solidarity in the Middle East is bankrupt. This week's COVER International Press Service story-"The end of the Camp David era: What next?"­ 304 W. 58th Street explores the dilemma of U.S. and British policymakers, New York City, N.Y. 10019 and examines the method by which an Arab-European Copyright Cl1979 New Solidarity alliance has put itself into position to take hegemony International Press Service over the Middle East away from the Anglo-American

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© 1979 EIR News Service Inc. All Rights Reserved. Reproduction in whole or in part without permission strictly prohibited. EXECUTIVE INTELLIGENCE IN THIS ISSUE REVIEW

Is Volcker insane? THIS WEEK

Because of the dire threat to the U.S. The case against Paul Volcker ...... 5 economy and the world represented by the recent actions of the Federal Reserve Board and its collaborators, our U.S. Report leads off with a spe­ ECONOMICS cial statement by the editors of Ex­ ecutive Intelligence Review: "Is the Volcker's 'organized chaos'- Fed's Vo lcker actually insane?" The the next shoe drops ...... 7 answer is yes, and ... something Third quarter 1979: the major trends in trade .. 15 worse. We have also taken a poll on Gold ...... 9 Transportation ...... 12 the sanity of Presidential candidates, International Credit .. 10 Banking ...... 12 leading congressional figures, the Foreign Exchange ... 10 Corporate Strategy . . 14 major news media, and others. Yo u can read the results in "Where they stand on Volcker's credit policy." Page 28 MIDDLE EAST

The end of the Camp David era-What next?. 18

Mideast Institute meet a flight from reality .. . .. 20 John Connally urges armed takeover ...... 22

Israel: the biggest government crisis ever ...... 23 Nahum Goldmann: Zionist challenges the Zionists. 26 The view from Bonn What is NATO's role in world affairs? What should NATO's military strat­ egy be? What should its political pol­ U.S. REPORT icy be? Should NATO have a political policy? Should NATO exist at all? In Is the Fed's Volcker actually insane? ...... 28 the fe atured story of this week's A statement from the editors of EUROPE Report, "The view fr om Executive Intelligence Review the Federal Republic," our Bonn cor­ respondent takes a look at the mili­ Where they stand on Volcker's credit policy .... 32 tary strategy debate as it is being conducted in Europe. Included: "An independent Europe-Kissinger­ LAW style," plus: "A cool reception for Hua." Page 41 Senator Kennedy's protection racket in the Federal Election Commission ...... 35

ENERGY

Are oil prices going out of control? ...... 37 How the multis made their record profits in driving the independents out

© 1979 EIR News Service Inc. All Rights Reserved. Reproduction in whole or in part without permission strictly prohibited. r

Vol. VI, No. 42 Oct. 30-Nov. 5, 1979

EUROPE Secret conference plots Caribbean "security" The view from the Federal Republic ...... 41 Our 80nn correspondent takes a look at Why are British, Canadian and U.S. the military strategy debate in Europe government officials in London for top-secret meetings to make deci­ An 'independent Europe'-Kissinger style ...... 43 sions about ... the Caribbean? There has already been a coup d'etat in El Salvador. On the agenda, according LATIN AMERICA to our inside source, are "changes in policy" by several other Latin na­ Secret conference in london maps tions not even represented at Lon­

Caribbean 'security' strategy ...... 45 don-they, and you, may read about

State Dept. hand in EI Salvador coup ...... 46 the secret conference for the first time in our LATIN AMERICA re­ U.S. 'reappraises' relations with Jamaica ...•... 47 port. We take you into the Anglo­ American backrooms . to view the COUNTERINTELLIGENCE plotting behind the public policy "reappraisals." Included: the reac­ tion of Latin Ame�ican nations to a Bircher Larry McDonald: perceived revival of U.S. "gunboat it's done with mirrors ...... 49 diplomacy." Page 45

PRESS

...... 51 Making the news media report the news India and Indira Rep. Zeller: need control of press power ...... 52 Will Indira Gandhi again rule India? In 1977, elections in India swept Mrs. ASIA Gandhi out of power, giving an over­ whelming mandate to the opposition Janata coalition. But after three India: World's largest democracy years of misrule, Indian voters seem at the crossroads ...... 54 likely to go to the polls this January New Wave's Ganesh speaks about India ...... 55 and give an overwhelming mandate 'For stability, unity and progress' in India ...... 57 to "stability, unity and progress," by sweeping Mrs. Gandhi right back into power. Specially featured in COLUMNS ASIA is an exclusive, wide-ranging interview with Ganesh Shukla, the

Congressional Calendar ...... 60 editor of the respected Indian news-

Facts Behind Terrorism ...... 62 weekly, New Wave. Page 54

Labor Periscope ...... 63

World Trade Review ...... " 64 Method = Information2 An intelligence service is only as good as its method, because information that's selected by method is information that's worth more. Executive Intelligence Review has the method-the computerized Riemannian Economic Model pioneered by Lyndon H. LaRouche, Jr., which for the first time explains why investment decisions based on high technology work best. And we bring you the information, 50 issues worth every year, including such exclusives as the first full-length interview with a leader of the new Reconstruction Government of Nicaragua, the first full analysis of the Alexander Haig presidential candidacy and what it means, an exclusive computer economic analysis comparing Jimmy Carter's latest energy program to other possible alternatives, and much more. Leading corporations and governments around the world make sure their executives and officials read the Executive Intelligence Review. Isn't it time you did too?

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The case against Paul Volcker

Death warrants have already been auto layoffs to two-thirds of the 1975 devastation of the economy on that served against home building and high-water mark for auto unemploy­ perennial bogeyman, the Organiza­ other consumer-oriented sections of ment-and auto sales began- to tion of Petroleum Exporting Coun­ the economy by major commercial plummet. In many areas of the coun­ tries. The current front-running con­ banks, well-informed commercial try, banks called auto dealers to tell tenders to challenge Carter in the bankers told us this week. The banks them not to send customers around Democratic and Republican parties, have instituted a policy of "triage"­ any longer for auto financing terms. Ted Kennedy and John Connally, letting the worst casualties die unaid­ • The nation's third largest sav­ have both given their approval to the ed-after Federal Reserve Chairman ings and loan association ordered its same Volcker measures that are cost­ Paul A. Vo lcker met with bank senior officers to refuse all new applications ing the CarterMondale team its cam­ management last week. In one bank­ for home mortgages, while savings paign in New Hampshire. In the 1980 er's words, the still crashing stock banks around the country began to presidential sweepstakes, only one and· bond markets are victims of a shut their lending windows. Accord­ leading voice has been raised to chal­ deliberate Vo lcker policy of "con­ ing to informed New York City in­ lenge the continued sojourn of trolled chaos," to deliver a "traumat­ vestment bank sources, the Federal Chairman Volcker in his Federal Re­ ic shock" to the U.S. economy and Deposit Insurance Corporation, serve office. That is Lyndon La­ force the.amputation of major areas. which regulates savings banks, has Rouche, Jr., who is running a strong Meanwhile, the White House already drawn up plans to merge race in the Democratic Party primary denied that it would respond to several large savings institutions into in New Hampshire. growing public anger against the Fed commercial banks. This would mark LaRouche is calling on Congress chairman's war on the U.S. economy. the end of the homebuilding indus­ to impeach Volcker for manifest In response to a question from this try. abuse of his office. We think this step press service, presidential spokes­ • States and municipalities can­ is not only necessary but urgent. man Jody Powell declared on Oct. 22 celed large offerings of securities on Only weeks remain before, under that he saw "no prospect" that Cart­ the tax-exempt bond market, after Volcker's regimen, the bottom third er would change his policy of sup­ the bond market continued in chaos. drops out of the economy. And it is port fo r the Fed or want to see its The value of all holdings of fixed­ expected that many politicians, par­ chairman changed. interest securities has fallen by more ticularly among the urban and labor Powell's disclaimer came just af­ than 8 percent in the past two weeks, Democratic machines that dominate ter another presidential aide, Stu Ei­ an unprecedented collapse. U.S. cities, will see things LaRouche's zenstat, was chased from New There are already numerous way. Hampshire where he went to stump signs that the administration and its -Nora Hamerman fo r Carter's re-election among pre­ backers plan to attempt to blame the sumed Carter supporters, all of them angered by the Volcker moves. And the first effects of Vo lcker's "triage" were being felt across the country. me Week in Briel • ( In the boardrooms of major J commercial banks, senior executives gathered on orders from Volcker to The European Community Fo reign Irish Foreign Minister Michael set up "priority lists" of customers Ministers, during a two day informal O'Kennedy, the current president of for triage. According to bankers, the session Oct. 21-22, resolved to step up the EC Council of Ministers, de­ first to go will be consumer loans, emergency food aid to Kampuchea. clared after the meeting that: "We homebuilding loans, and real estate The meeting occured in the midst of want to get this aid to people who are loans, as well as loans to small and Chinese Premier Hua Guofeng's visit starving. We will be dropping food medium-sized firms generally. to France. The ministers indicated from airplanes and we will not now • Ford and General Motors an­ that they would recognize the new be concerned whose planes they nounced another 19,000 auto lay­ Kampuchean government of Heng are." offs-bringing the current level of Samrin, which is allied to Vietnam. That statement has been inter-

Oct. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW This Week 5 preted as meaning that the aid will be Carrington's intention to place The article entitled "Our Savage En­ distributed through the government Harlech at the head of such a force, emy" says: "A big character wall in Phonm Penh, possibly using trans­ observers say, indicates British desire poster in Guangzhou dennounced port supplied by Vietnam. The state­ for a showdown between the Cubans the Guangdong Revolutionary ment also implies rejection of the U.S. and Soviets, on the one hand, and the Committee, especially the vice chair­ State Department's efforts to attach U.S. on the other. man ... for having savagely killed political conditions to the relief sup­ people by beheading, disembowell­ plies through international agencies. * * * tng, gouging out the liver, goring After the decision was an­ human flesh, making tonice out of The Soviet Union has announced a nounced the British daily the Guard­ male testicles, burying people alive, schedule for completion of an elec­ ian noted Oct. 22 that "The French drowning people, tying explosive tron-beam fusion-energy pilot facility. and Irish governments have argued charges to human beings and setting The announcement was made by for some time that the continued in­ off the charges .... Once, 200 people Prof. Leonid I. RUdakov at the dedi­ sistence of a majority of EC govern­ were killed by the latter method. Li cation of the first 48 electron-beam ments in recognizing the Pol Potre­ Shu-yang of the production brigade units for the Angara-5 research facil­ gime makes neither moral nor polit­ was beheaded and his sister forced to ity in Moscow. The announcement parade his head in the streets (the girl ical sense, and the decision this week­ confirms that the Soviet Union is later -committed suicide). The wall end seems to open the way for a significantly ahead of the United poster cited a series of names of lo­ gradual distancing States iilfu sion power research. of the Europeans from Pol Pot." "When it is completed, " said Ru­ calities and the number of people killed in those localities." * * * dakov, who heads Soviet electron­

beam research, "we hope to obtain a * * * controlled thermonuclear reaction as The name of Lord Harlecb bas been a result of which the facility will be mentioned by Britisb Foreign Minister producing more energy than it con­ President Carter will ask Congres­ Lord Carrington as the man who will sumes. Angara-5 will demonstrate sional approval for arms sales to Mo­ rocco. The White House made the bead tbe British mission in Rhodesia that an industrial pilot plant can be announcement Oct. 22. The Cabinet during the interim period leading to built." was reported split on the decision new elections there. Lord Harlech, Fusion energy is considered the because of tensions in the area. whose name was dropped by Car­ primary energy source for the 21st Since 1975, Morocco has sought rington during ongoing talks on the century, possibly becoming a major to annex the Western Sahara, a for­ Rhodesian problem in London, is source by the 1990s. It is safe, clean, also known as David Ormes by­ and virtually limitless in its supply mer Spanish colony, and has met Gore, and was ambassador to the potential. with armed opposition from the Pol­ isario Liberation Front, whose pro­ U.S. during the Cuban Missile Crisis. The Soviet's Angara-5 results are visional government is recognized by Harlech has been a member of impressive, but not unexpected ac­ 34 African countries led by Algeria. the British delegation at the London cording to specialists. They fulfill a Both France and Spain, calling talks since they began Sept. 10 Car­ long-stated schedule, and confirm the conflict a decolonization issue, rington has also leaked that Lord the Soviet Union's commitment to Harlech will head a team of British investment in advanced technology, have agreed to help resolve the prob­ lem in the United Nations. Carter's Generals and police officials during even when there is no short-term decision to arm Morocco with recon­ the interim period; the Rhodeaisn "payoff" anticipated. military machine of Lt. General naissance planes and helicopter gun­ Walls will be leftinta ct. This arrange­ * * * ships comes as Algeria and neigh­ ment has been rejected by the Pa­ boring Mauritania, too, have been triotic Front liberation organization Vietnamese daily Nban Dban carried taking steps to resolve the conflict and is likely to inflame tensions in a report denouncing torture and grue­ through the U.N. and the Organiza­ Rhodesia. some murders in Kwang tung, China. tion of African Unity.

6 This Week EXECUTIVE INTElLIGENCE REVIEW Oct. 30-Nov. 5, 1979 ECONOMICS )

Volcker's 'organized chaos'­ the next shoe drops

Capitol Hill, banking, Federal Reserve and administra­ conditions which have prevailed in the U.S. financial tion sources are unanimous that the United States markets since Volcker unveiled his new "tight money" economy will be subject to what one official called "all program. kinds of controls" before the end of 1' The federal funds rate, the cost of overnight inter­ 979. In a letter to commercial banks published by the Ne w York Times bank loans, has been fluctuating wildly in the range of Oct. 25, Fed Chairman Volcker invoked the Credit 6 to 18 percent on a given day-and 20 percent and Control Act of 1969-under which the President has higher for "lower quality" regional banks. On Oct. 23, the power to take comprehensive control over all do­ the Fed injected reserves into the banking system when mestic credit flows-as the motivation for bankers to Fed funds were trading over 17 1/4 percent, indicating that the nation's money managers wanted the key short­ term interest rate lower. "But no one knows what the C_D_O.....:.�_ES__I_C E_D_I Fed means any more when it conducts its open market _C _R T _ __T ___ �) operations," one government securities dealer remarked fo llow the guidelines he prop'osed candidly. on a "voluntary" basis. Thus far, the Fed chairman has done no more The $3.9 billion issue of two-year notes sold by the than to show the banks the instruments of torture, to U.S. Treasury on Oct. 23 carried a record-smashing 12 short-circuit the bottp'wing and lending spree that 5/8 percent coupon. The average yield had been esti­ erupted immediately after his Saturday night austerity mated at 12 1/4 to 12 1/2 percent just the day before, message. The implications of Volcker's letter are, how­ and the actual rate was an astonishing 2 1/2 percentage ever, much broader. points higher than the record set on such notes three Britain's move to abolish exchange controls is a weeks earlier. good watermark of the state of Volcker's regime. "These With the Treasury's borrowing costs shooting up so British are really smart," said a Senate source close to uncontrollably, all projections of the federal budget Vo lcker. "Volcker and Carter people told them what deficit are being discarded. "Volcker cannot deal with they were going to do, and they said, 'Here's our the fiscal chaos unleashed by his monetary policy" is chance.' They made the necessary moves to facilitate the way one well-placed source described the situation. maj or cash and credit outflows, and prepare for battle. He predicted that the $33 billion projected deficit for If the dollar goes as a reserve currency, the good old fiscal 1980 would rise to $40 billion and probably much pound sterling will become important once again. We'll higher get currency blocs. The U.S. has been dictating econom­ The nation's portfolio of fixed income securities has ic policy fo r years. Maybe we should let the British do lost upwards of 10 percent of its previous market value more, like they used to. This' is all 1931 in reverse." since Oct. 6, a much more telling indicator of the America is getting Britain's controls and inflation disintegration of the credit markets than the near 100 rate, and Britain is getting America's free capital market point drop of the Dow Jones industrial average since and inflation rate. In the Oct. 25 Financial Times, the highs of last summer. A small minority of corpo­ columnist Samuel Brittan proposed "the launching of rations had planned equity offerings even before the the petro-pound," predicting a ma. jor return by sterling new credit squeeze. However, a long list of corporations to reserve status. and municipalities were getting ready to enter the bond Vo lcker is trying to rule through uncertainty, and market in the hopes of shifting some of their heavy allowing, in the process, the scavengers of "controlled short-term borrowing to the long-term market. Prior to disintegration" to make their big play. The conse­ the Fed's moves, some $3 billion in bonds were expected quences for the U.S. credit system will be terrifying. for October. The actual borrowings will be at least 20 "Organized chaos" was the deadly accurate phrase percent below that. used by London brokers last week to describe the Total uncertainty exists about the future availability

Od. 30-Nov. 5, 1979 EXECUTIVE INTElLIGENCE REVIEW Economics 7 of long and short-term credit, and businesses are ad­ can, pass on the additional borrowing costs in the form justing accordingly. Even before the Fed's latest tight­ of price increases. ening binge, the Conference Board had estimated that The group also fo resaw that to the extent that capital spending by manufacturers would drop by 8 Vo lcker's current policies increase unemployment, they percent or more in real terms in 1980. However, since will trigger a huge rise in transfer payments for unem­ Oct. 6, the future of capital spending looks a lot worse. ployment and Social Security (Volcker has already said In the meantime, current production schedules are he would like to outl�w future cost of living increases being cut back. The executive of a leading truck man­ for senior citizens and unionized workers), a widening ufacturer said that his company plans to cut back of the federal deficit, and unexpected new borrowings production by 15 percent in December. by the Treasury, which would have to be supplied by the Federal Reserve's pr-inting presses. The monetization of federal debt by the Fed would in turn accelerate Hyperinflation money supply growth and set the stage for the impo­ Fore the moment, the principal effect of the Volcker sition of de jure controls on credit issuance and wages package has been to unleash a monetary hyperinflation and prices. in the United States. Faced with the prospect of zero Rudy Oswald, research director for the AFL-CIO credit availability down the road and the liklihood of was highly critical of the Fed's current course in an mandatory credit controls, corporations have begun a interview, but said the labor organization wants the full mad scramble for existing credit lines, which has been implementation of the Credit Control Act of 1969-a bidding interest rates up beyond all expectation. On law on the books which permits the President to au­ Oct. 24 the Federal Reserve announced that business thorize the Fed to allocate credit as it sees fit. Oswald loans declined nationally in the week ending that date. said he believes this will promote "equality of sacrifice." However, investment bank sources closely tuned in to Speaking fr om a different perspective, Henry Kauf­ the conditon of corporate finances say it is premature man, of Salomon Brothers, the guru of the credit to call this decline a trend for the reason that the markets, told a seminar of the Conference Board in corporate sector is "hooked on" short-term credit. Frankfurt on Oct. 23 that once a recession develops, The liquidity problems of the corporate sector are the U.S. must impose capital controls to stop the flow more serious than in 1974 on the eve of the last of dollars abroad and fo rce a repatriation of dollars recession, Wall Street analysts say. Whereas that time back to the U.S. Otherwise, said Kaufman, the domestic around coorporations had accumulated short-term debt money supply will be unbearably tight, as tax cuts and to finance the build up of inventories-which were other fiscal measures would be unable to quell the subsequently liquidated along with the debt-this time deflationary tendencies. corporations have been borrowing short-term merely to cover operating expenses and to finance purchases of sorely needed capital equipment. The high interest rate De facto controls regime initiated by former Fed chairman William Miller A system of informal controls on the issuance of credit increased corporations' credit dependency by triggering already exists, in the view of some commercial bank the cycle of interest rates chasing inflation chasing economists, who cite the pressure by the Fed on the interest rates. banks against raising the prime rate too fast or high on This situation has prompted widespread expecta­ the one hand, and the sharp rise in the banks' cost of tions that the next phase of the "Volcker revolution" funds, on the other. The rise in the prime lending rate will be imposition of controls-wage-price controls, to 15 percent on Oct. 23 was miniscule compared to the credit controls, and capital controls-of a severity that run up in the banks' cost of fu nds. After adjusting for will make 1971 look like a test case. the reserves requirements, the effective cost of new A private seminar in Washington D.C. in mid-Oc­ three-month certificates of deposit has been between 16 tober attenqed by members of the Brookings Institu­ and 18 percent in recent days. tion, investment bankers, and corporate leaders dis­ According to Donald Woolley, chief economist of cussed the inevitability of the imposition to rein in the Bankers Trust, the Fed's "jawboning" has forced banks current hyperinflationary tendencies in the economy­ to reevaluate their lending policies. "Since Oct .. 6 loan which the group emphasized are being aggravated by appraisals have taken on a new light," says Woolley. At Chairman Volcker's latest "tight money" gambit. Ac­ that point senior management at the banks took a more cording to one attendee, the consensus of the group active role in scrutinizing, making day-to-day loan was that the Fed's present policies will not make a dent decisions. Loans to long-standing business customers in the record growth of credit in the economy; corpo­ are being favored over mortgages, brokerage loans, rations will continue to borrow for their survival no consumer loans, and loans to lesser Quality businesses. matter how high interest rates go and, as long as they -L. Schulman and D. Goldman

8 Economics EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 and a well-known advocate of gold's C_GO_L_D monetary role. ______The present situation, wrote ) Donati, "should be the occasion to reflect anew on one of the common­ sense solutions proposed earlier by Jacques Rueff. It consisted of three proposals which were inseparable from one another. 'A beautiful trick' Vo lcker's treason by demanding that "What is the problem? The exist­ the International Monetary Fund ence of a large mass of unwanted Western European and OPEC na­ (IMF) pay off non-negotiable dollar dollars which increases each year. tions should take steps to counter the demands in gold. How to sterilize it? We must take depressive effects of U.S. monetary "Let the IMF pay off dollars in advantage of the increase in gold policy on the world economy, ac­ either pegged gold prices or in gold [prices] to revalue all the metallic cording to a memorandum released at current market prices. In either reserves in the central banks, begin­ Oct. 18 by leading international case, the IMF will be bankrupted, ning with those of the United States. economist Lyndon H. LaRouche, Jr., and the Treasury and Fed will be This is the first proposal . a candidate for the 1980 Democratic forced to value U.S. gold reserves at "It would then be clear that mon­ Party presidential nomination. market prices. etary reserves are amply sufficient to ·Capital control measures cur­ "This trick will work beautifully make good all fo reign debts denom­ rently being contemplated by Federal at this juncture. The only question is inated in dollars. We thus neutralize Reserve Chairman Paul Volcker and whether the Arabs and Europeans the inflationary effect which the mas­ the Carter administration could have the nerve to take advantage of sive increase of [U.S.] official mone­ make tlte dollar a "non-negotiable the stupidity of Volcker et al. in this tary reserves might otherwise threat­ currency," LaRouche stated. In that way." en to create. event, European and Arab govern­ In previous public statements, "That is the second proposal. It ments, which hold large dollar bal­ LaRouche, a contributing editor to would allow redemption of the ances, should attempt to protect Executive IntelligenceRevie w, has ad­ United States' external debts in a their economies by compelling the vocated a major expansion of U.S. much healthier fashion than that International Monetary Fund (IMF) exports of high-technology capital proposed by the IMF with the crea­ to accept these dollars in exchange goods and farm technology. Such an tion of "substitution accounts" for fo r gold valued at or near the current export drive could be financed the dollar. Moreover, part of the new market price of $400 an ounce. This through floatation of gold-backed liquidity thus created would permit would drain the IMF, which has only Eximbank bonds, already author­ annulment of the non-oil-producing $40 billion worth of gold at that ized by the bank's charter. Third World's debts, in order to free price. the Third World from a more and It would also put the U.S. Treas­ more intolerable weight. ury into a form of receivership. The "The third proposal, just as fun­ Tr easury would have to accept Euro­ damental, would consist of a new pean and Arab demands fo r the res­ A three-point gold Bretton Woods to reestablish ration­ toration of gold as a key world re­ proposal al discipline in the creation of inter­ serve instrument, and upvalue its national means of payment, based on own gold reserves in order to remain Scoring the "aspirin administered by a respected standard of which gold solvent. The U.S. currently holds 265 international monetary meetings," would be the basic component. million ounces of gold worth about financial columnist Francois Donati "This in no way would mean the $100 billion at market prices. wrote Oct. 4 in the French daily Les return-unthinkable fo r all sorts of The LaRouche memorandum Echos de la Bourse-the Paris equiv­ reasons-to the sort of gold standard reads in full: alent of the Wa ll Street Journal-that that functioned before the First "In response to the treasonous the U.S. government has "extensive World War. But this would enable us, package of measures by Federal Re­ means" at its disposal to prevent the after having cleaned the Augean sta­ serve Chairman Paul A. Volcker;Eu­ continued collapse of the dollar and bles, to avoid witnessing a renewed ropean and OPEC financial officers to halt chaos in the international anarchic proliferation of monetary should declare that the 'capital con­ markets. numeraires. trols' measures of Volcker et al. have Donati asserted that the solution "Interest rates could be massively made the U.S. dollar a financially lies in proposals made by the late lowered, investment could take off non-negotiable currency. They Jacques Rueff, Charles de Gaulle's again, and unemployment could fi­ should aid the United States against chief advisor on monetary affairs nally decrease."

Oct. 30-Nov. 5, 1979 EXECUTIVE INTElLIGENCE REVIEW Economics 9 pull in overseas dollars in the short INTERNATIONAL CREDIT run. But European credit and trade ( would be painfully vulnerable in the ) unravelling world economy U.S. "au­ tarky" would precipitate. Frankfurt bankers claim they can limp through a world recession the way they sur­ ture the flightmo ney outside the U.S. vived 1974-75-by belt-tightening. Euromarket shakeout Federal Reserve jurisdiction. To this But no full-scale capital markets cri­ in the works Lazard Freres of New York replies, sis materialized in 1974-75. This "If the Europeans try anything, we prospect is now undoubtedly inten­ London's bid this week to become can expatriate all the working capital sifying intra-European battles over the leading international banking from Western Europe. That's $150 when and how to activate the inter­ center once more is based on a bet billion-boom! Half the floating national development fu nd plans that the United States will pull back base of the Euromarket-see how mooted when the European Mone­ into a North American economic they like it." tary System emerged 15 months ago, zone-taking enough Eurodollar Asked what would happen if Eu­ plans currently pressed by the Iraqi liquidity with it to dry up continental rope responded by simply activating and Mexican governments, by Saudi Europe's international lending as its gold reserves at a $350-per-ounce factions, and by the leadership of the well. valuation and issuing new credits Nonaligned Movement. Expectations are mounting of against this $147 billion backing, La­ While the EMS hangs fire on ac­ U.S. capital controls: things have zards said, "Then you have two mar­ tivating its massive gold and dollar reached a point at which West Ger­ kets, one backed by gold and the reserves to meet the threatened credit man thinktankers say Frankfurt has other by American grain." gap, London and costrategists in contingency plans to abolish all re­ If Volcker goes for capital con­ Switzerland are moving to provoke a strictions on inflows, so it can cap- trols, West Germany could indeed dollar blowout and reorganize world

visors fo resee "outflowsfrom Britain in the short term, more inflows in the (FOREIGN EXCHANGE longer term." ) The Oct. 24 Lex column of the London Financial Timesasserts that London will "start to claw its way that major investors like the British back into lost markets" (there has Hit against dollar to Coal Board or Midland Bank have just been an agreement between the prime sterling's role had no difficulty in buying upAmer­ London Metals Exchange and Stock ican equity while controls were still Exchange to establish a gold futures The British Exchequer announced in effect. market). "The challenge of a new Oct. 23 that all restrictions on U.K. The intent is not simply accelera­ era" will involve I) sterling finance citizen's purchases and use of foreign tion of the "buy America cheap" of third-country trade (prohibited currency have been lifted. The an­ gambit first set fo rth in the London since 1976), 2) building up, with re­ nouncement came as something of a Economist two years ago. The City servations, overseas sterling bal­ surprise, though the move had been anticipates a dollar tailspin as fixed­ ances, and 3) mammoth investment mooted since the advent of the To ry income dollar assets are unloaded. in North America and the Pacific government in May. The investment The U.S. currency has been fairly Basin at the expense of "a demoral­ premium surcharge on dollars used strong only because of a temporary ized Wall Street." The editorial in the to buy into foreign securities had demand for dollars due to higher oil same issue exults, "Britain wiH re­ gradually declined this year to the 5- prices. With or without ensuing full sume its role as a capital exporter." 6 percent range, but had not nar­ scale capital and exchange controls London Te legraph commentator rowed fu rther this week in anticipa­ on the U.S. side, London is now Hamish McRae rejoins, "Don't be tion of an end to restrictions. poised to make "petrosterling' a re­ too euphoric, watch out, because this "No one expects a mad outflow serve currency once more. New is a gamble." of capital," as Barclays put it, noting York's Citibank foreign exchange ad- -Susan Johnson

10 Economics EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 lending at the expense of "useless land is rumored to be organizing a West German bankers for their eaters." A crisis in the Eurodollar supervisory commission to ration part are now confronted with a leg- bond markets, spreading to all fixed­ credit to Latin America. islative proposal for consolidated income dollar assets in Volcker's The danger of a deliberate des- balance sheets and credit surveil­ zooming interest-rate atmosphere, tabilization of Brazilian debt is up­ lance designed to help contract their can trigger the blowout. Short-term permost in many minds, but there is international lending. West Ger­ Eurodollar interest rates continued a further angle. Geoffrey Bell of many is the "swing vote" on acti­ to climb this week; Eurodollar bond Schroders Bank, chief advisor to vation of the European Monetary prices Iost 1.-1.5 percent in one day; Ve nezuela on management of its pe­ System gold-backed credit expan­ and the London Financial Times an­ trodollar reserves, is reported to be sion plan. French policymakers are nounced a "near panic" with "nasty escalating his ongoing pressure on on balance more progold and less institutional losses" on Eurobonds Ve nezuelan authorities to diversify tolerant of intense austerity for the at the same time they note that many the reserves out of the dollar and LOC's. Frankfurt continues to claim Third World borrowers cannot serv­ into sterling-with the help of prov­ that the monetarist-minded Bundes­ ice their debts at current rates. ocations from the U. S. State De­ bank is a formidable obstacle to full Under the Bundesbank's tight­ partment (see Latin America). The EMS credit operations, and in short money regime, both West German roof could be pulled down on the appears, or chooses to appear, to be call money and short-term Euro­ heads of the New York bankers who waiting to thrash out the interna­ deutschemark rates continue to rise as well. The domestic bond market is said this week that they expect the tional development fund option un­ d a mess: on Oct. 23 the federal capital Latin American debt to be slowly til the Fe eral Reserve has actually markets committee reduced the is­ but successfully refinanced as "we thrown the Euromarkets into a tail­ sues authorized for the coming four get a better picture of what Volcker spin. will do," and saw the sterling div­ -Laurent Murawiec, Wiesbaden, weeks to 470 million marks' worth, . down from 700 million the month ersification push as "ridiculous" Susan Johnson, New York before. No corporate issues were in­ cluded. The German Bankers' Asso­ ciation warns that the 4 million OM bond for the U. S. Treasury an­ nounced Oct. 24 will "crowd" the What you should know about gold situation fu rther. Luxembourg subsidiaries of West If you read Executive Intelligence ning your investment strategy. German banks are now dumping Review regularly, you know that "How does the European Mone­ their bond portfolios on the market this publication has had by for the tary System work and how has it because they cannot afford to carry best record of predicting major remonetized gold?" "What does them at the present high interest gold price developments in recent gold remonetization mean for the rates. Market sources expect up to months. In early August, when U.S. economy and the dollar?" half a billion marks' worth of this kind of liquidation in the last week of many respected U.S., British, and "How do the European gold pro­ October. All fo ur of the total 400 Swiss gold analysts were predict­ posals differ from the pre-1914 million marks in new Euromark ing a gold market collapse, we gold standard?" All these ques­ bond issues have been stillborn. were instructing our readers to tions and more are answered in In Italy, a 13 percent cut in their prepare for further upward move­ an easy-to-read question and an­ ceiling on credit to industry has just ments. What's our secret? We swer format. The report also in­ been announced, as the prime rate know that gold is primarily a po­ cludes important policy state­ reached 16 percent, and price in­ litical question, and that what ments by European officials not creases of 15-21 percent have been governments do is the key to un­ generally available in the U.S. imposed on medicine, transport, derstanding today's markets. press. As an added feature, we electricity and heating. Executive Intelligence Review present a history of the events has put together a 40-page spe­ leading up to U.S. rejection of gold LDC crackdown According to unconfirmed reports, cial report to give you all the back­ on Aug. 15, 1971, and who was the International Monetary Fund ground information you need to responsible. will provide no further credit to put this method to work in plan- Turkey "until it has a stable govern­ ment," and British banks will ob­ To receive your copy of "Gold Returns to the Monetary System," please send $50.00 serve the ban. Zaire faces tough debt by check or money order to Executive Intelligence Review, Fifth Floor, 304 W. 58 Street, renegotiations. The Bank of Eng- New York, New York 10019.

Oct. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Economics 11 soclatlOn. The new chairman is an C_T R_A_N_S_P_O_R_T_A_T_IO_ N economist from the University of ______California at Berkeley, whose creden­ _ __) tials are exemplified by his service at the Civil Aeronautics Board under airline deregulator and inflation czar Alfred Kahn. , The ICC is considering several moves that would effectively knock out regulation in the trucking indus­ Moving closer to how the American economy should try. Last week the commission shifted operate on a day-to-day basis," said the burden of proof in motor carrier deregulation Cannon. "Such challenges will not entry cases. In order to receive certi­ Senate Commerce Committee Chair­ go unanswered." fication, previously, new applicants man Howard Cannon says he is During the administration of had to prove that existing carriers "mad as hell," and with good reason. outgoing chairman Daniel O'Neal, were unable to handle the freight He's incensed that the Interstate the ICC has progressively relaxed volumes over their routes. Now, the Commerce Commission is imple­ many of its most important regula­ ICC ruled, if new applicants-are to be menting deregulation by de facto tory measures. That trend will great­ denied, existing carriers must prove means, and not only exceeding its ly accelerate when Darius W. Gas­ that further competition would drive congressional mandate but overrid­ kins becomes the ICC chairman on them out of business. ing Congress's transportation legis­ Jan. 1. Gaskins will "make Dan This is a built-in formula for re­ lation .. O'Neal look like a regulator," in the ductions in trucking routes, as both "It is not the responsibility of the words of Bennett C. Whitlock, pres­ Te amsters and industry officials con­ regulatory agencies to determine ident of the American Trucking As- tend. It is unlikely that most com-

In June, New York State Banking

__ __ Superintendent Siebert forced the ______� __ _ C_B_AN_K_IN_G ) Hongkong and Shanghai Bank to withdraw its application for permis­ sion to vote the shares it wanted to acquire in Marine Midland. Ap­ proved by the Federal Reserye, the HongShang takeover hit the rocks that the Superintendent probably after the New York Anti-Drug Coa­ Comptroller's hearing would not approve the transaction, lition launched a campaign through at least on the terms approved by the the state legislature protesting the on Mari ne Midland shareholders of Marine Midland merger. At issue were U.S. Labor Par­ hit snag Bank. Inc . ... Accordingly, Marine ty-published charges, incorporated Midland Bank filed its application to in the best-selling paperback Dope, An apparent oversight by lawyers fo r obtain the approval ofthe Comptrol­ Inc., that the HongShang is still in­ Marine Midland Bank and the ler to convert to a national bank and, volved in financing international Hongkong and Shanghai Banking upon receipt of that approval, to take narcotics traffic. Corporation left bank officials with all the steps necessary to effect its Superintendent Siebert testified red faces at Oct. 23 hearings before conversion to a national bank." at the Oct. 23 session, fo llowing tes­ Comptroller of the Currency offi­ In framing that statement, Ma­ timony in Buffalo the d�y before cials in New York City. Marine Mid� rine Midland General Counsel from Marine Midland and U,S . La­ land is the object of a "friendly" Frank J. Laski apparently forgot bor Party representatives. In her tes­ takeover by the HongShang. that the Comptroller's own guide­ timony, Siebert complained that the In applying for conversion from lines explicitly state that no such ap­ HongShang had failed to provide a state to a national charter, Marine plication may be made in order to information of the type that any stated that the primary motivation "circumvent state regulation." Yet American bank would submit, in­ for the timing of the application was that is what Laski indicated Marine cluding an accurate statement of the that "by June 1979, it became clear Midland is trying to do. distribution of profits, a full list of

12 Economics EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 mon carriers could prove potential profitable mileage and mergers with locomotive shortages, what will tend bankruptcy from one or two such acquisitions of other railroads." to happen is that large corporations applications per route; they would While Gaskins is softpedaling this and (to a far lesser extent) shipper tend to cut less profitable routes in­ line because of the outcry from ship­ cooperatives will corner the market stead. The entry changes are a fur­ pers, his policy commitments are ex­ on "train space." This could easily ther means of eroding the fixed rates actly in this direction. He admits the give rise to a rail space futures mar­ set by the industry, an erosion which consequences. "While this may be ket, with speculation on and manip­ would cut profit margins and, again, inevitable and desirable in the long ulation of cars and trains driving spur route abandonments. run . ; . it could present severe transi­ prices out of sight-and leaving tion problems for some shippers de­ smaller shippers even more stranded The railroad "transition" pendent for the moment on rail serv­ than they often are now. The ICC has already liftedman y of ice." CORS also wants the ICC and the pricing restrictions on railroads, Among the newest champions of Congress to abrogate railroad right­ to the misguided delight of the indus­ rail dereg is the Committee of Rail­ of-way rules, under which railroads try generally. Railroads argue that road Shippers (CORS), a grouping are not permitted to cross another rate deregulation will enable them to of 15 major corporations formed ear­ line's tracks or lay new track along cut prices and attract more volume lier this year. One CORS proposal is that line's right of way. As Clifford in areas of high competition with for Congress to legislatively author­ M. Sayre of Dupont puts it, "This trucking. ize contracts between individual would be a way for a shipper to reach But the rails' great hope, as the shippers and railroads, which the around a marginal railroad to a Journalof Commerce recently under­ ICC until recently had not permitted. healthy railroad, which could con­ lined, "lies not only in freedom to On the one hand, shippers would tribute to the collapse of short haul price and market more imaginative­ gain security of knowing they would railroads or marginally profitable ly, but in the rationaization of their be able to get cars and trains at spec­ railroads." systems-the abandonment of un- ified times. But given rail car and -Stephen Parsons

subsidiaries, and certified balance HongShang statements to take from this account the sheets (see below). amount of profit that management But the Superintendent's strong­ inadequate wants to publish. The secrecy of the est statement came in response to a Th e fo llowing are excerptsfrom New true profit is further reinforced by question from a U.S. Labor Party Yo rk State Banking Superintendent the practice of burying the inner representative at the hearings. "We Siebert's testimony before the Comp­ reserves account in the deposits ac­ didn't investigate the charges that troller's hearings on Oct. 23. count. The result of this practice is the Hongkong and Shanghai Bank that profits, deposits, and capital refused to submit its books because The number of financial statements are not fairly stated in the published of involvement with illegal doperev­ [submitted by the HongShang] was financial statements of Hongkong enues," Siebert said. "We decided inadequate to properly analyze the and Shanghai Banking Corpora­ that the Federal authorities were in a Hongkong and Shanghai Banking tion .... better position to handle this. It is Corporation group as an economic Requests [for further informa­ theoretically possible that the Hong­ tion] resulted in a long series of kong and Shanghai Bank was in­ entity. Second, the statements which volved in this." With the paucity of were submitted did not contain marathon bargaining sessions be­ information provided by the bank, enough detail to make a comprehen­ tween applicant and the banking she concluded "there was no way to sive analysis of them possible. In department. We were told that most tell. " fact, the statements were rather ab­ of the material we had requested At the hearings, the Labor Party breviated. The profit and loss state­ was not available, that the applicant charged that if the Comptroller yio­ ments, for example, showed only the was not geared to produce it readily, lated its own stated rules by support­ amount of published profit and how and that producing it would involve ing the takeover application, "it it was distributed .... inordinate costs and delay. It was would damage the integrity and A glaring example of this is the also evident that the desire to pre­ credibility of the American monetary practice of Hongkong and Shanghai serve the secrecy of some of the authorities." Banking Corporation to credit an information was also a significant account called "inner reserves" with factor. -David Goldman the true profit of the bank and then

Oct. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Economics 13 John T. Booth : EVP and Director of Blyth Eastman Dillon, experts in (CORPORATE STRATEGY corporate reorganization. Blyth ) Eastman's parent corporation, In­ surance Company of North America, is the major backer of the New Yo rk Insurance Free Zone, designed to fa­ cilitate the funneling of industrial capital into offshore speculation. Crocker Nevin : former chairman and CEO of Marine Midland Grace Trust Company, linked to the Marine no large shareholders with whom he Midland Bank, which is trying to SCM: who really might ally.. That means he would liquidate itself into the Hongkong have to swing many thousands of and Shanghai Bank; and a governor wants to sell out small holders. He doesn't seem to of the U.S. Postal Service. have it. E. Everett Smith : counsel for "Why would a guy buy $7 million of He seems to have a lot of cash, McKinsey & Company, the British common stock, with really immense however. Little is known about his "consulting" firm most dedicated to financing costs, and spend another privately held corporation, which in­ the London Economist magazine's million to boot running full page cludes garment manufacturing and motto "Buy America Cheap." SCM's ads, telephone operations, hiring photocopying firms. The Ne w Yo rk chief executive officer, Paul "Horatio Bear, Stearns, sending mailings just Times estimates his chest at $1 mil­ at the Gates" Elicker, after a stint to try to take a company he can't lion, not counting what he has spent with Robert McNamara's "whiz ' take anyway?" demanded an insider on margin purcha�es of SCM stock kids" at Ford Motor, spent fo ur years sympathetic to the present manage­ at high interest. Muller is committed with McKinsey. ment of SCM corporation. to about $7 million worth of SCM Richard C. Bond: one of the three Control of SCM's more than common. trustees of the Penn Central, which $800 million assets in paper, industri­ Muller is not a longsuffe ring successfully liquidated a multibillion al resins, food, and business equip­ SCM stockholder who's willing to do dollar operating railroad into a mul­ ment is being sought by a stockhold­ just about anything to get some cash tibillion debt burden on the public er named N. Norman Muller, head out of his investment. He made his while transforming the company of Macmuller Industries. The twist is first SCM share purchase this March into a multibillion dollar real estate, that Muller, and his advisers, Bear, at 18.375 and continued to purchase tax-loss operation. Bond· is also a Stearns, are out to take over the in large lots through the end of July director of INA. board of SCM for the sole purpose when the stock stood at over 30. This seems to add up to a Mutt of dissolving the corporation and re­ Normal trading in SCM stock is only and Jeff act played out to convince alizing what they claim is a liquida­ a few hundred a day, and when Mull­ stockholders at large that liquida­ tion value of$36 to $77 a share. er quit buying the stock fell back to tions are the agenda of the future. SCM's president Paul Elicker 21, leaving Muller with a nasty loss Given the Federal Reserve's Vo lker told the Wa ll Street Journal: "SCM if he tries to sell, since his average credit policies, industrial earnings wants to continue as an independent purchase price was 23.75 and large­ will slump or disappear. One might company, and will vigorously and scale selling would depress the price. even conjecture that the timing of aggressively defend the interests of If Muller's part in this affair this entire act was coordinated. the company and its shareholders." seems shadowy, possibly a front for The only actors who can be be­ SCM has been a lackluster cor­ someone else's money which appears lieved are Bear, Stearns, the retained poration, and, undoubtedly, some to be wasted in any case, the manage­ advisors to Muller, who openly ad­ stockholder discontent exists. Yet ment of SCM itself is even more du­ mit that they want to become the big there is no chance that Muller can bious. On the board sit fo ur individ­ name in corporate liquidations. Pre­ succeed in his bid to take it over. uals whose histories and present af­ sumably if someone wants to buy Muller now has 286,000 shares, filiations place them among the America cheap, someone h�s to sell about 3 percent of the outstanding leading experts in corporate liquida­ it cheap. . voting common stock and there are tion in the United States. They are: -LeU Johnson

14 Economics EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 Third quarter 1979: the major trends A summary of the commodity-content of leading inter­ likely to be cancelled. West German banks, now under national trade agreements for the third quarter of 1979 pressure from the Bundesbank to constrict their inter­ requires the explanation that "politics," as much if not national loans, had been a major lender to the Ecevit more than questions of currency and the like are government. In early June the Soviet Union had signed determining world trade. The fact that certain British an $8 billion trade and development package with and U. S. circles seek to replace European and Japanese Turkey, which included the export of Soviet nuclear trade ties to OPEC and the Soviet sector with anti­ reactors. Two months later Turkey undertook negotia­ Soviet strategic ties to China, Egypt, Israel and so forth tions with Asea-Atom of Sweden for construction of a $500million nuclear reactor at Akkuyn. The only bright spots for nuclear exports were: (I) an Argentine order of a $2.8 billion heavy water __ C_W_O_R_ L_D__ T_ R_A_D _E ______) nuclear power station to Kraftwerke Union, and an associated $1.2 billion heavy water plant from Switz­ erland's Sulzer firm. This reactor order follows an April exemplifies this point. Otherwise, a third quarter review Argentinian order of four Candu reactors worth $1.9 of trade deals shows a number of significant develop­ billion from Canada. ments .. (2) A Spanish order for two nuclear power plants, • Shipbuilding and nuclear reactor exports have all one to be built by Kraftwerke Union, the other by but collapsed. General Electric. The orders are important because they • Aircraft orders remain strong, but largely for break a three-year Spanish moratorium on new nuclear obsolete technology. reactor construction. When the two reactors are com­ • Some sjgnificant industrial-project lending has pleted, 35 percent of Spain's electricity will be nuclear continued to the so-called NOCs (newly industrialized generated. countries). This contrasts with the "Fourth World" (3) South Korea purchased two reactors from West­ sector, where project lending has all but collapsed. inghouse in a deal worth $1.38 billion. A $1.17 billion • There is a rise in bilateral oil deals between credit was given preliminary approval by the Eximbank producer and consumer countries, including oil-for­ in connection with this deal in September. This will be technology deals--an understandable defense against the largest single credit ever issued by a U. S. financial the multis after Iran's recent oil production shutdown. institution. • There are some noteworthy deals between France . These nuclear deals, however, are surprisingly slim and West Germany on the one hand and the Comecon ' pickings in the wake of the exorbitant post-Iran oil sector on the other. The Soviet Union for its part price hikes. continues to fu nction as the transmitter of technology to a number of key "NOCs" such as India. Shipbuilding and aircraft The Executive Intelligence Review's weekly log of major Nuclear reactors world trade deals (see back page) during the third Nuclear reactor exports . during the third quarter were quarter underlines the depressed state of the shipbuild­ minimal in the wake of the news media's "accident" at ing industry, with a $393 million Indonesian purchase Three Mile Island (Harrisburg, Pennsylvania), on the of four semi-container ships from West Germany and one hand, and the Iranian cancellation of an $8.9 billion a package of ship orders for South Korean yards being German-French nuclear reactor project initiated under all the quarter has to show. Aircraft export orders in the Shah. The Iranian cancellation scuttled two nearly value terms, by contrast, must have seemed gratifying, completed Kraftwerke Union (West German) reactors especially for Boeing, the principal beneficiary of the worth $6.9 billion, and two Framatome (French) reac­ orders (as opposed to Western Europe's Airbus, which tors at preliminary stages. Kraftwerke Union has suf­ did better in the second quarter). Among Boeing's third­ fered severe financial losses. quarter orders received were a $1.556 billion sale of 40 A major nuclear purchase agreement initiated by jets to Japan's Nippon Airways, a $208 million order Turkey, in light of a government change, also seems fo r three jets from Holland's KLM, a $508 million

Od. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Economics 15 order for five jets from Italy's Alitalia (following Ali­ quarter, two from General Electric (a $90 million deal) talia's cancellation two weeks earlier of an order for six and one from Switzerland's Brown Boveri (a $40 million McDonnell Douglas DC-l Os), a $63.2 million order for deal). fo ur jets from Trans-Brasil Linhas Aereas, an approxi­ (2) Brazil's August agreement with Japan's visiting mately $60 million purchase of five jets by Greece's minister Sunao Sonoda to negotiate over $2 billion in Olympic Airways, a $1.39 billion order of 30 jets by Air development projects. Also received from Japan durIng Canada, and a $157 million order for three jets by Thai the same month were two loans totalling, $11 3 million, Airways. one of which is earmarked as a contribution to port­ History, as opposed to Boeing's stockholders, will expansion at Tubarao as part of a $2.7 billion joint steel not remember the third quarter as a happy one for project. During the same period, however, it was an­ aviation, however. During the quarter, announcement nounced that the $400 million powerhouse project in was made that there would be no further production of the Amazon basin, for which France's Schneider Em­ the Anglo-French consortium's supersonic Concorde pain group is the major contractor, would be delayed jet, the only commercial airliner that represents a sig­ in the wake of Brazilian budget cuts. nificant new technology. But, the NDCs' industrialization plans are threat­ ened by the new GATT pact, which is against subsidies "Third world" and "fourth world" trade to industry. Technology exports to the poorest of the LDCs, the so­ West Germany was surprisingly inactive in the third called "Fourth World," were few and far between. The quarter with regard to major project starts in both the most interesting was a $750 million floating power "Fourth Wo rld" and the NDC sector of the "Third plant that Thailand contracted for from C. Hoh and World," confirming a tendency since the beginning of Co. of Japan, with financing from Japan's Overseas the year for the Germans to concentrate on European Economic Cooperation Fund. When completed it will and Comecon developments. The one exception was be the world's largest floating power plant. Kraftwerke Union's above-mentioned Argentinian nu­ The trade picture for the NDCs, those "Third clear contact. World" countries with significant industrial capac ity such as India, Mexico, and South Korea, was somewhat East-west trade better, with continued commercial bank loans. India A number of important East-West trade deals were has continued to benefit from East-West rivalry. Just as concluded during the third quarter between Western U.S. nuclear, aerospace, and electronic technology prog­ European countries and the Comecon group, as an ress took place largely as a byproduct of U.S. efforts to outgrowth of the detente thrust initiated by West Ger­ keep up with post-World War II Soviet efforts, Western man Chancellor Helmut Schmidt's groundbreaking industrial investments in India have been principally May 1978 agreement with Soviet Premier Brezhnev. determined by a desire not to see the Soviet Union West Germany and East Germany have concluded a become too influential in India through the latter's $3.28 billion, six-year barter agreement (West German major contributions to Indian industrialization. Thus coal and crude oil in exchange fo r East German gasoline the British-French offer of financial and technical as­ and petrochemicals). France has also concluded ' a bi­ sistance for a projected $3.5 billion steel mill at Ban­ lateral trade agreement with East Germany, initially galore during this past summer-which seemingly flies involving joint production of machine tools in France in the face of European Community Industry Minister for sale in both countries as well as in third country Count Davignon's call for a rationalization of world markets. "excess" steel capacity-is readily understood in the Poland was the beneficiary of a $900 million credit context of a Soviet second-quarter commitment to line fr om a Japanese banking consortium. A significant finance and build a 3.5 million tons per year steel plant portion of this credit will be used for purchasing at Vishakapatnam. This Soviet commitment followed foundry and chemical equipment. The Soviet Union another Soviet commitment two months earlier to assist will be getting a $200 million plus steel plant at Novo­ India in building two giant canals for drought preven­ lipetsk fr om Armco Steel (U.S.) and Nippon Steel Co. tion, at a cost of $25 billion over 15 years. (Japan). The USSR also received a one-year extension Other significant technology-export deals benefiting of its expired five-year trade pact with Italy, worth $300 the NDCs were: million a year in business for both countries. (1) The Republic of China (Taiwan)'s receipt of $2 12.5 million Eximbank loan to finance the second Trade with the OPEC sector phase of construction of a $1.8 billion integrated steel Despite the knocking out of pro-development Iran in mill for the China Steel Corp. Among the U.S. suppliers the first quartt:r, major project contracts continued to are Dravo Corp. and Combustion Engineering. The be issued by the OPEC sector during the third quarter, ROC also purchased three power plants during the third with activity by Saudi Arabia being conspicuous and

16 Economics EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 with a significant amount of telecommunications equip­ mented in the third quarter by occasional actual oil-for­ ment purchases being registered. Sweden's L.M. Erics­ technology deals: son was the most prominent beneficiary. Greece, for example, will receive one-third of its oil During the third quarter, the Saudis placed: requirements from Libya in return for Greek construc­ A $1 billion plus order with the Japanese for desal­ tion projects in Libya and the establishment of an ination units for the new city of Jubail, and a 550 investment company to plan joint ventures, including megawatt power plant; a possible ammonia and fertilizer plant. An $800 million order for computer-controlled tele­ Venezuela will "up" its oil sales to Brazil from 20,000 ' phone equipment with Sweden's L.M. Ericsson and barrels per day (bpd) to 50,000 bpd in return for Holland's N.V. Philips (This is the largest single order Brazilian export of nuclear technology to Venezuela. in the history of the telecommunications industry); Both countries will work together on tar-sands tech­ A $250 million preliminary order fo r an ammonia­ nology, with process-heat for tar-sands possibly supplied urea fertilizer complex with Pullman Kellogg (U.S.) and as a byproduct of nuclear energy generation. a Republic of China (Taiwan) partner; France has concluded a $100 million plus deal with A $220 million order for 16 gas turbines with Syria, involving transfer of telecommunication equip­ General Electric. ment and a Peugeot factory in return for gas exploita­ Libya ordered a $550 million package of telecom­ tion rights. munications equipment from an Italian consortium of OPEC itself has been doing a limited amount of concerns linked to the Agnelli family. development financing. Zaire was issued a $157 million Iraq ordered a six-lane expressway from Japan's railway modernization loan by OPEC, while OPEC­ Marubeni Corp., the biggest construction deal ever won member nation Saudi Arabia's Fund for Development by a single Japanese company. issued a $200 million loan to Pakistan for a thermal Nigeria was active, ordering an $80 million propyl­ power station, dam construction, a fertilizer factory, ene plant fr om a subsidiary of Italy's Montedison, and port construction and for diesel locomotive purchases. a $188 million metallurgical and engineering plant and other capital goods from Hungary, Czechoslovakia, and 'China Card' trade Norway. During the third quarter, there were reinstatements of several billion dollars in cancelled orders by the People's OPEC bilateral deal. Republic of China. The most important restitutions A number of Western European countries, above all were enabled by major concessions from Japanese ven­ Italy, moved aggressively after the post-Iran oil hoax to dors. Meanwhile, Walter Mondale during his China visit secure their oil supplies through country-to-country promised China $2 billion in trade credits over five contracts with various oil�producer states. Japan, for years. Headed by the Banque du Commerce Exterieure, example, in August concluded an $8.2 billion deal for there is a $2 billion credit line from France for com­ the purchase of 36.5 million barrels of Mexican crude puters, machine tools, and other nonmilitary goods. over a period of ten years. This tendency for bilateral Britain moved ahead with plans to provide both civilian state· to-state purchase agreements, already noticeable and military technology to China. in the first and second quarters, began to be supple- -Richard Schulman

Oct. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Economics 17 MIDD'. EAST'

The end of the Camp- David · era WHAT NEXT?

The resignation of General Moshe Dayan from his post mitting that between Egypt and Israel, "not one single as Foreign Minister of Israel on Oct. 21 has not only iota of an agreement" has been reached that he could plunged the Israeli government into crisis, but bares cite as a potential success. This admission, which hit before the eyes of the world the abject failure of U.S. several capitals like a bombshell, can only be seen as policy in the Middle East. Dayan, more than any other the obituary for the Camp David process. Israeli, symbolized the Camp David treaty, and his What is at stake is the entire policy outlook that, resignation from Menachem Begin's government sym­ since the October 1973 Middle East war, has dominated bolizes the fact that the Egyptian-Israeli pact contained the U.S. administration and the Council on Foreign in the Camp David framework has come to a dead end. Relations (CFR). For Carter, the Egypt-Israel pact has The Dayan resignation will lead to a rapid unrav­ been portrayed by media men as the triumphant and eling of the American-Israeli strategy in the Middle most important foreign policy achievement of his tenure East. Cyrus Vance and Zbigniew Brzezinski virtually as chief of state. For the CFR and for NATO strategists, imposed Dayan on Prime Minister-elect Begin fo llow­ the Camp David pact was much more: it was the ing his stunning electoral upset-victory in May, 1977. It cornerstone fo r construction of a vast new military was Vance and Brzezinski who dispatched Rabbi Alex­ alliance across the Mediterranean and the Middle East, ander Schindler, then-President of the Conference of the "Middle East Treaty Organization," in which the Presidents of Major American Jewish Organizations, to NATO allies would work through surrogates for the Jerusalem to urge Begin to bring Dayan into the control of the oil resources of the Persian Gulf. That Cabinet, in order that Begin's government, already strategy-reiterated by Sen. Henry Jackson on · Oct. tinged with an extremist character, not appear entirely 21-is still desired by a major faction of the Anglo­ unpalatable. Then, it was Dayan, upon being appointed, American establishment, but because of the firm op­ who traveled to a series of secret meetings with Egyptian position fr om Western Europe, the Arab world, and the officials that eventually led to the Camp David Summit Soviet Union, Camp David can no longer serve as the in Sept. 1978. vehicle for it. The Carter administration has virtually admitted Once again, the Middle East is up for grabs. The that the Camp David framework has collapsed. U. S. Americans are groping for a new-or newly packaged­ Special Ambassador Robert Strauss, who is charged policy. By mid-November, the member states of the with representing the United States at the Egyptian­ Arab League will convene a summit meeting to discuss Israeli talks on Palestinian autonomy, stated bluntly the next phase of the Arab strategy, probably in con­ that he does not expect the U.S., Israel, and Egypt to be junction with Western Europe. There are rumors of a able to put together a formula acceptable even to a major new European initiative to bring the Palestine moderate fraction of the Palestinian population. "I have Liberation Organization into the picture. That, accord­ reason to believe that we will complete the work as­ ing to European sources, is in turn part of a package­ signed to us," declared Strauss, who added that he deal involving tighter European-Arab economic and hopes only that Jordan and the Palestinians will be financial ties, which would include a closer integration "leaning over our shoulder" by the time the May, 1980, of the European Monetary System with the resources deadline draws near. Then, in a statement to a House of the Arab oil-producing countries. subcommittee, Strauss was even more pessimistic, ad- In the short term, the resignation of Dayan will lead

18 Middle East EXECUTIVE INTelLIGENCE REVIEW Oct. 30-Nov. 5, 1979 to a rise of tensions in the Middle East, especially along France, Ireland, Spain, and the European Community the Lebanese and Syrian border. Deprived of its "mod­ as a whole have taken major steps toward official erate" anchor, the Begin government is expected to recognition of the PLO; should Europe recognize the drift sharply to the right in order to preserve the PLO, it would be a break with American policy in coalition. In particular, the new Renaissance Party led NATO unprecedented since World War II. by physicist Yuval Neeman gained momentum in recent With each passing day that the sterile Egypt-Israel weeks, and many of Begin's supporters are being drafted pact sits there, unable to attract even passing Arab . toward. Neeman's bloc. Neeman has adopted an extre­ interest, the United States loses more friends both in mist position in favor of outright annexation of the Europe and the Middle East. occupied terrotories, including the Sinai peninsula, and So, the CFR and its Carter administration are forced the cancellation of the Camp David accords. to choose between two unpalatable-for them-alter­ But the Carter administration and the Anglo-Amer­ natives. ican faction is now confronted with a deep dilemma. On the one hand, there is a powerful faction which With its Middle East policy in shambles, the Americans demands a military showdown with the Arabs and the and the British are, for the first time, in danger of Soviet Union to break resistance to Camp David. They . losing control over the policy-developments in the area advocate that Israel escalate tension along the Syrian to a coalition of Arab and European partners backed by the Soviet Union. It is that dilemma, and its impli­ cations, that we examine in this section.

Camp David POlt mortem A Zionist tells the Zionists What happened to Camp David? The strategy itself was based on a fundamental to return to Geneva. miscalculation. When the Carter administration and the British engineered the separate Egypt-Israel treaty, they -See page 26 did so with the mistaken expectation that the voiced opposition from moderate Arab countries such as Jor­ dan and Saudi Arabia would disappear, and that King Hussein and the Saudi royal family would eventually border, in the context of a massive U.S. military buildup join in, bringing at least some Palestinians with them. in the region. Led by such spokesmen as Alexander Not only did that not occur, but so far the negotiators Haig and Henry Kissinger, this faction is prepared for have been unable to induce even a single Palestinian an eyeball-to-eyeball confrontation with the USSR in representative to join in the talks. the Middle East. But more level-headed and realistic Second, although Washington did not immediately policy makers in the CFR clique are aware that such a expect Western Europe to rejoice in support of Camp scenario is likely to lead either to World War III or to David, the almost complete refusal of the Europeans to a humiliating U.S. backdown in which Soviet troops back the separate Egyptian-Israeli peace had not been and armor backing the Arabs would hand Israel a predicted by the Camp David architects. The reason is stunning defeat. clear: from the start, Camp David was calculated by On of the other hand, gradually surfacing is a the Anglo-Americans as a challenge to the Arabs, and somewhat larger faction of the CFR which believes that implicitly to OPEC . Hence, any European support for it is necessary for the whole Camp David pact to be the treaty would have been taken by the Arabs as a superseded by some more comprehensive policy that sign of outright hostility. Europe, especially France and includes, inter alia, a near total withdrawal by Israel West Germany, was certainly not willing to risk its from the occupied Arab territories and the establish­ delicate and important strategic relations with the Arabs ment of some kind of Palestinian "homeland." But the because of American pressure to support Camp David. question that this faction-which includesthe tradition­ Since Camp David, in fact, the Europeans have al "Arabists" and patricians such as George Ball-is taken giant strides in establishing a close working unable to answer, is: Once such a process is begun, can relationship with the Arabs. On the financial level, the the Anglo-American bloc maintain control over the end European Monetary System is cooperating closely with result, or will the Europeans and the Arabs simply seize the Arabs to hammer out the details of a new world control of the Middle East mechanism? If the latter, it monetary system linked to gold. Meanwhile, the Euro­ is clearly not an acceptable alternative, from their point pean governments are working with the Arab oil-pro­ of view. ducing countries to increase the level of state-to-state Nevertheless, it appears as if, sooner or later, Wash­ oil sales and oil-for-technology deals that, for the most ington may have to adjust to that reality. part, bypass the multinational oil companies. Finally, At present, the State Department and most of the CFR

Oct. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Middle East 19 policy establishment have decided to stall for time. To accomplish that objective, and to draw attention away fr om the failure of Camp David, State Depart­ ment special envoy Philip Habib will arrive in the region this week to set into motion a new American MideastIn stitute meet initiative over Lebanon. That crisis, which worsened again last week, is to be discussed with Syria, Lebanon, a flight from reality Jordan, Israel, and Saudi Arabia, along with the Vati­ can, with the State Department seeking some roundta­ ble discussion among all parties to the dispute. If that On October 5 and 6, approximately 800 Middle East can be set up-which is extremely unlikely-then the specialists, academics, businessmen, and representatives U.S. hopes to turn it into a kind of "Camp David of the intelligence community, gathered together at a north," in which Syria and Jordan can be set against Washington hotel to be told what the vast majority of the PLO by offering them partial Israeli withdrawals them knew to be a lie: that the Camp David peace from the Golan Heights and the West Bank. approach, "for all its shortcomings," is still viable, and Another initiative is that of John Connally, who must, somehow be kept alive. proposed a comprehensive plan for a peace settlement "I find it unconscionable that President Carter is based on nothing more than naked American military not getting his due for intervening in securing the Camp power, a string of U.S. bases in the area, a new Indian David pact," intoned Hermann Eilts in his keynote Ocean fleet, and so forth. The sheer scope of the address to the conference. Hammering away on this Connally plan (see below), which he has made into the theme, Eilts, fo rmer ambassador to Egypt and one of basis of a Presidential campaign fight, indicates that it the principal negotiators of the Camp David accords, is designed to serve as a discussion paper for a Middle told the largely bored audience that "without the per­ East policy that can replace Camp David, which Con­ sonal intervention of Jimmy Carter, Camp David never nally says bluntly is incapable of bringing the area to would have happened." "No president but Carter,," the next phase because of Arab opposition. Eilts continued, "has realized the centrality of the And finally, there is Moshe Dayan. Dayan, who is Palestinian issue." Israel's most sophisticated politician, has been exploring The event at which Eilts was speaking was none alternatives to the present fo rm of Camp David for a other than the 33rd annual conference of the Middle while; but he is committed to ensuring that whatever East Institute, entitled "The Middle East After Partial policy eventually emerges will be merely a linear exten­ Peace: What Lies Ahead?" The conference's answer to sion of the Camp David strategy. On the eve of his that question was: who knows? resignation, Dayan announced that he would support What was remarkable about the conferen'ce was not a unilateral dismantling of the military-government the mere fact that such a large number of top Middle apparatus in the West Bank and Gaza and the estab­ East policymakers had assembled to listen to such lishment of "local police forces" to replace the Israeli drivel. The most striking aspect of the entire affair was troops that now patrol the area, as a carrot to induce the utter bankruptcy of policy being put forth 'at the resident Palestinians to participate in the autonomy conference. Indeed, for the most part, no policy, let talks. Beneath the surface, however, the pot is boiling alone strategy, was being put forth at all. in Israeli politics. Things aren't moving in Dayan's To understand what went on at the Middle East direction. Institute conference-and what didn't-it is necessary -Robert Dreyfuss to understand what, in fact, the Middle East Institute is. In a nutshell, the Institute was founded at the end of World War II as an outpost of British intelligence in the United States. Formally affiliated with the School of Advanced International Studies (SAIS) of Johns Hopkins University-whose directors proudly describe the Camp David treaty as "a SAIS conspiracy"-the Middle East Institute is also a sister institution-of the Ditchley Foundation in London, perhaps Britain's top collection of policymaking aristocrats. The Middle East Institute also operates in coordination with the Council on Foreign Relations in New York, an outgrowth of the Royal Institute for International Affairs and the main policymaker for the Carter administration, and the

20 Middle East EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 Republican and Democratic parties' national leadership U. S. has also been excessively timid vis-a-vis the Pales­ as well. tinians." Then, in a sharp insult to the Arab world, The conference was opened by L. Dean Brown, Quandt dismissed out of hand Arab objections to Camp president of the Institute, and George R. Packard, dean David. "There is nothing in the Camp David process of the School of Advanced International Studies. After offensive to the Arabs." calling Camp David "a SAIS conspiracy," Packard After several hours of reinforcing the audience's stressed the importance of Camp David in the "main­ sense of helplessness and despair, the conference was temince of the post-war economic system" worked out opened up for questions and discussion from the floor. at Bretton Woods. Packard's statement reflectedthe fact One uneasy attendee raised the possibility of a return that what is really behind the Camp David accords is to the comprehensive peace framework of Geneva in not concern for peace in the Middle East, but a preo­ light of the obvious limitations of Camp David. Michael cupation with stopping the consolidation of a new Hudson rudely r�fused to answer the query, dismissing monetary system to replace the International Monetary it as a "procedural question." "A Geneva conference Fund around the core provided by the European Mon­ would not be fruitful," he stated. He then went on to etary System. lecture the audience on the "dangers of formalism" in Herman Eilts then presented the keynote address. considering a joint u.S.-Soviet peace conference. Throwing his weight behind Camp David, Eilts took the occasion to introduce one of the central themes of EIR on the scene the two-day conference-that technology and Islam In an effort to fracture the environment and force a don't mix. "It took a fundamentalist revolution in Iran return to reality, Robert Dreyfuss, Middle East editor to show Americans the repellent effect that the exces­ of the Executive Intelligence Review demanded that the sively rapid introduction of technology in the Middle panelists-in particular, William Quandt-address East can have," stated Eilts. He continued by praising themselves to "the reality that France, West Germany, Iran's sudden shift toward feudalism and deindustriali­ and the countries of the newly established European zation as "constructive neutralism." Monetary System have determined to replace the Inter­ national Monetary Fund with a new set of global No alternatives institutions." "Part of the package," stated Dreyfuss, A panel discussion presented by Michael C. Hudson "is the expansion of the new European Monetary Sys­ (Executive Director of the Center for Contemporary tem and a comprehensive peace that will destroy the Arab Studies at Georgetown University), Michael E. Camp David pact. In refusing to cooperate with the Sterner (State Department), William B. Quandt (The Europeans, the Arabs, and the Soviet Union for the Brookings Institution and fo rmer member of Zbigniew establishment of a new monetary order and a compre­ Brzezinski's National Security Council), and Robert J. hensive peace, the U.S. is gunning for war. How do you Cummings (Howard University) followed Eilts' pres­ expect the Arabs to line up behind Camp David when entation. Acknowledging that Camp David's momen­ the prospects are so promising of working with the tum is fast petering . out, Sterner gleefully stated that Europeans-who are moving openly toward a break "fortunately the rejectionists have not put fo rth an with official U.S. policy by recognizing the PLO-for alternative plan." Then, framing his remarks in the an overall settlement?" Cold War context of the "growing Soviet threat to the The dozing audience suddenly became alive with region," Sterner lied about what is at stake: "If the excitement. To put the lid back on the situation, Quandt peace process can't be kept alive, Soviet inroads into totally dodged the question. "I have absolutely no the Middle East will escalate." knowledge of Europe's monetary moves," stated Picking up on this theme, Quandt, who is operating Quandt. "Nor do I subscribe to the exotic metaphysical of the Brookings Institution as Zbigniew Brzezinski's connections you have made between economics and "free agent," lauded Camp David as "a sincere attempt politics," he added incredibly. Then, eyeing the audi­ fo r a comprehensive peace settlement" and scored ence, he acknowledged: "I'm not much of an econo­ "those cynics who say Camp David does not provide mist." for an overall peace." However, Quandt continued, "we Despite Quandt's curt dismissal of the issue raised, are approaching the end of the period during which Dreyfuss's question succeeded in striking a chord of Camp David can be pushed forward ... By next year, positive response from numerous businessmen and in­ Camp David will lose its credibility, and then we'll have telligence officers at the conference who are horrified a pr oblem." by the administration's-and MEI's-insistence on The only solution to the problem, Quandt suggested, skirting the reality of Camp David's demise. The U.S. is to hound the Jordanians and Saudis into getting on is getting locked out by the Europeans. For the remain­ board. "The United States has done very little to get der of the two-day conference, numerous conference Jordan to cooperate. The same with Saudi Arabia. The attendees congratulated Dreyfuss on his intervention in

Oct. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Middle East 21 the proceedings and followed up his query with related questions of their own for the panelists to answer.

Khomeini embraced · One of the most disturbing panels took place the John Connally urges afternoon of Oct. 5. Speaking as part of the panel, James A. Bill, a professor at the University of Texas · armed takeover and one of the architects of the revolution in Iran, presented what amounted to an apology for the feu­ dalist, fanatic Ayatollah Khomeini. At the end of his In a major policy statement that harked back to the speech, Bill made six "policy suggestions" for the U.S. coldest days of the Cold Wa r. Republican presidential to follow: candidate John Connally called this week fo r a u.s. (1) The U.S. should admit some of its past errors in military takeover of the Middle East from the Mediter­ Iran, i.e., its hesitancy to openly back the Khomeini ranean to the Persian Gulfand Iran. takeover. Connally pleged a massive increase in U.S. naval (2) The U.S. must begin speaking favorably of the presence in the Indian Ocean. the creation of a new Fifth Khomeini revolution. Fleet. American bases in the Persian Gulfand Oman. u.s. (3) The U.S. must begin studies on Iran's culture, air fo rce bases on the Sinai peninsula. and the establish­ religion, and related matters to better appreciate and ment of a Middle East Tr eaty Organization linked to spread appreciation of the Khomeini takeover. NA TO and committed to "taking on the Soviet threat" to (4) The U.S. must send a new breed of foreign the region. servi�e officers to Iran who appreciate Khomeini. To entice "moderate" Arab states into tolerating the (5) The U.S. must express its support fo r Khomeini plan. Connally endorsed "self-determination " fo r the Pal­ by sending in agricultural and technological aid. estinians and the possibility of an "independent entity" in (6) The U.S. must not contact exiled Iranians who the occupied We st Bank and Gaza aft er Israel withdraws. want to drive Khomeini out of power and establish a Almost as soon as the plan was made public. it drew republican form of government committed to indus­ sharp denunciations from We stern Europe and the Arab trialization. world. Wh en asked about Arab opposition to the Connally The following day, during a question-and-answer plan. Sam Hoskinson. a fo rmer CIA agent who is cam­ session, EIR editor Drefuss challenged Bill and the paign coordinator at Connally-for-President headquar­ officers of the Middle East Institute to explain this ters. replied. "tough shit. " outrageous endorsement of Khomeini in light of the Hoskinson. who authored the plan along . with such fact that Europe and the Arabs-as well as the other Connally consultants as Fletcher School professor U.S.S.R-will soon put an end to the Khomeini cancer W Scott Thompson. Wa ll Street lawyer Rita Hauser. that has overrun Iran "because he threatens the eco­ Charles Wa lker. and the Committee on the Present Dan­ nomic development and political stability of the entire ger. also voiced the negative attitude toward Europe the region." Panel moderator Dayton Mak punted: nobody candidate will adopt in his presidential race. Connally has is qualified to answer Dreyfuss' question, he said. already stated his opposition to the European Monetary System. and has endorsed the genocidal Pol Pot regime oj Doom and Gloom Kampuchea. The rest of the conference was doom and gloom, with Th e presidential policy statement released by Connally no solution in sight. James H. Noyes of the University is the first sign of a serious statement on an issue by any of California at Berkeley ticked off a series of catastro­ contender except fo r Democratic Pa rty candidate Lyndon . phes that are about to engulf the Middle East: Iran is LaRouche. Connally's efforts. however. runs directly on the verge of disintegrating, affecting the world's oil counter to LaRouche's development-oriented. Europe­ supplies; Iraq could disintegrate as well; the Gulf states linked Middle East peace fo rmula. are also on the brink; the Soviets are building up a Excerpts of the Connally proposal fo llow. "beachhead" in South Yemen and Afghanistan. En­ dorsing Bill's six-point program for U. S. policy toward . In some quarters, there is presently a notion. that no Iran, Noyes talked of the "growing panic in the U.S. serious attempt to achieve a comprehensive Middle East over the collapse of Iran's role of policing the Gulf," a settlement should be pressed until after our elections in role that the U.S. can readily fill. "We are extraordinarily 1980. Advocates of this course propose that our gov­ vulnerable in the Gulf," Noyes shrilled, plugging pro­ ernment try merely to keep the peace process alive by posals for a U.S. military intervention. focusing on preparatory discussions, peripheral issues -Nancy Coker and frequent expressions of faith and optimism until . our presidential election is out of the way.

22 Middle East EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 In my view, such temporizing is unacceptable. The The geostrategic vortex of the struggle between the quest for peace should never by secondary to domestic Free World and Communism has shifted to the Middle politics. Playing for time always involves risks. To play East and all of the states with a critical interest in its fo r time in regard to a region where the fuses are so outcome should bear their fair share of the defense short as in the Middle East would be to play a most burden . . dangerous game. Therefore, fo r the critical key that can make a reality Te nsions which threaten the peace span the globe. of the previous eight points, the United States should Nowhere, though, are the stakes so high as in the maintain a strong military presence in this vital area, Middle East. including major Air Force components. It may be The oil of the Middle East is and will continue to be possible, for example, to lease the former Israeli airfields the lifeblood of Western civilization for decades to in the Sinai. come. The continued flow of oil from that region is I would propose further that we take elements of and will continue to be critical to the realization of the the Sixth Fleet in the Mediterranean and the Seventh aspirations of the millions who live in the developing Fleet in the Far East and, with such augmentation as world. necessary, create a Fifth Fleet to be stationed in the Indian Ocean. Soviets and palestinians An immediate approach should be made to the The Soviets clearly benefit from continuing regional Sultan of Oman with a proposal to develop Masirah instability. The constant tension and warfare in the Island or other appropriate site into a U.S. naval base region provide them with virtually unlimited opportun­ to support the new Fifth Fleet and provide security for ities for exploiting the free world. the Arabian Sea and the strategic Straits of Hormuz. Because of this, we cannot count on Soviet help to Since World War II we have maintained military bring peace to the Middle East. On the contrary, we forces in the Far East and Western Europe .... We must should expect them to throw every road block they can now provide a military shield for our Middle East think of in the way of peace. We must simply move interests as well. ahead without them and in spite of them. It is vital to neutralize both the Soviets and the extremist Palestinian elements. We should also be willing to give the Palestinian leadership a chance to talk provided they are prepared to accept Resolution 242 and hence the territorial integ­ Israel: the biggest . rity of Israel, and renounce all terrorist tactics. government crisis ever Peace plan and diplomatic strategy 1. Except for minor border rectification, mutually agreed upon, Israel must withdraw from the West Bank, Israel has now entered what France's Ie Figaro news­ Gaza, and Golan, all of which will be demilitarized. paper Oct. 23 justly called "one of the gravest crises in Israel would, however, be permitted to. lease military its history." As a result of the stall in the Camp David strongpoints in each of these areas for a mutually talks, a domestic economic collapse rapidly getting out agreed upon period of time, and have guaranteed access of control, and a government coalition permeated by to these points. corruption and malfeasance, the Israeli situation has 2. All Israeli civilian settlements, including the so­ become more polarized and chaotic than ever before. called paramilitary ones must be withdrawn from the The danger of an actual fascist insurrection, or an West Bank, Gaza, and Golan .... overtly annexationist government coming to power, 3. The Palestinian people should decide for them­ looms very large. selves whether they prefer the West Bank and Gaza to Public awareness of the depths of the crisis has been ' be governed as an entirely independent entity or to be catalyzed by two major events that took place this an autonomous area within the Kingdom of Jordan. week. The latter approach has great merit and should be First, Israeli Foreign Minister Moshe Dayan re­ thoroughly explored .... signed, citing the government's failure to soften its 8. The United States should organize a new treaty position toward the Palestinian Arabs, and counterpos­ alliance to cover the Middle East, as a further guarantee ing his own, more "pragmatic" approaches to the of the ultimate settlement, and to protect regional oil problem. fields and shipping lanes from Soviet or terrorist inter­ While the departure of the "pragmatic" voice from ference. The alliance should include Israel, the moderate the cabinet could force leading Israelis to come to grips Arab states, NATO and Japan. with the failure of Camp David in an honest fashion,

Oct. 30-Nov. S, 1979 EXECUTIVE INTELLIGENCE REVIEW Middle East 23 in the immediate term Dayan's departure will strengthen against our existence . ... Each existing settlement will the faction· led by Agriculture Minister ' Ariel Sharon be enlarged and re-enlarged, and this will be a physical that seeks the annexation of the occupied West Bank danger to the people of the West Bank and Gaza." territory and deploys the Gush Emunim fanatics as an The Cabinet has been acting under pressure from instrument to this end. Gush Emunim, which has been provoking confronta­ Second, the Israeli Supreme Court made an unprec­ tions with the army and unilaterally expanding illegal edented decision, ordering the controversial Gush Emu­ settlements to assert their "divine right" to control nim settelment at Elon Moreh on the West Bank to be "Judea and Samaria;" the Old Te stament names of the dismantled. The settlement was established for ideolog­ West Bank. As the Jerusalem Post editorialized Oct. 16, ical rather than security reasons, said the court; it was the government is facing a "planned, protracted insur­ therefore a violation of the Hague and Geneva inter­ rection by elements that seek to feist their own policy national conventions pertaining to territories occupied upon it." by fo rce. But, as the Post went on to say, the "Gushies" are Again, while the Supreme Court decision should be not acting alone: they are getting enthusiastic support a boon to "realist" and "moderate" factions inside fr om Neeman's Renaissance group. Israel, it also could provoke a preemptive move by Neeman is posing the gravest threat Israel's pro- extremists to modify Israeli law to give legal cover to annexation. Cabinet members of the Gush-influenced National Religious Party have already issued appeals fo r Israeli law to be made more "Zionist" and associates 'Israel's worst mess' of Sharon and Israeli nuclear bomb architect Yuval Neeman, founder of the fascist Renaissance (or "Tehi­ Th e fo llowing article. entitled "Israel's Wo rst ya") 'Party, have called fo r the territory's outright an­ Mess." was published in the Baltimore Sun Oct. 12. nexation. Th e article was authored by Ruth Cale. the Sun's As Le Figaro noted, "The danger of Israel being jerusalem correspondent. divided between those who believe in 'state law' and those who, like the leaders of Gush Emunim, belive in "Unless a miracle happens, the disintegration the 'superior divine law' and in 'Jewish history,' is quite of most of Israel's public services will set in later real." this month, threatening the nation's social, moral and economic fa bric, and possibly even its dem­ "A nail in the coHin of peace" ocratic system. Prior to this week's events, a perceptible hardening was "Head over heels in debt while the Finance setting in in Israeli policy toward the West Bank. Ministry has reneged on its commitments to them, According to .the Jerusalem Post Oct. 17, the Cabinet city governments run the risk of grinding to a has mapped out "copious and detailed material" for halt, since they won't be able to pay wages and the creation of six new West Bank settlements during buy gas for their garbage disposal trucks .... 1980, which would be "coupled with the strengthening "Like a landslide picking up speed, economic and stabilizing of existing settlements" and the "chan­ and social disaster has been threatening for a long neling (of) more manpower and resources to develop time. But Prime Minister Menachem Begin's coa­ West Bank settlements." lition government, paralyzed by vicious infight­ Three days earlier, the Cabinet voted to prohibit ing, has failed to ... begin to stop the rot. .,. government expropriations of private Arab lands, but "What is needed for a start, according to to sanction use of signficant amounts of other kinds of economists of the central bank and universities, land-a nifty legal technicality that was fully endorsed are drastic measures that will sweep thousands of by Sharon, and by the Gush Emunim itself. While the redundant public employees out of their jobs, Anglo-American press reported this as "moderation," thereby significantly reducing the budget and the a top National Religious Party leader, Yehuda Ben-Meir, printing of banknotes .... was more honest. According to the Oct. 17 Jerusalem "For months the Prime Minister deferred de­ Post, Ben-Meir identified the "true meaning" of the cisions that would halt the economic decay. . .. ' Cabinet decision to be the "creation of a whole new Mr. Begin adamantly rejected all suggestions that category of West Bank land considered fit for seizure Treasurer Simcha Ehrlich be replaced ..,. Political without even a formal order." circles believed Mr. Begin was simply afraid to Conversely, Arab leaders on the West Bank reacted remove a brick from his wobbly structure fo r fear to the decision as an extreme provocation. Bethlehem that it would bring the whole house tumbling Mayor Elias Freij, hardly a radical, called the decision down." "a nail in the coffin of peace," a "flagrant aggression

24 Middle East EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 fe ssedly democratic system has ever faced. When he Economic collapse convened the group's fo unding convention earlier this The Neeman threat would be fa r less serious in Israel month, with 3,000 enthusiastic supporters in attendance, were it not fo r the state of the country's economy. Israel Neeman remarked that "we have the Chief of Staff on stands at the brink of economic catastrophe. our side" in justifying illegal escapades on the West Last week, the Israeli Central Bureau of Statistics Bank. As one former Israeli parliamentarian remarked admitted for the first time that Israel's annual rate of upon hearing Neeman's speech, "Neeman is a Jewish ·inflation has reached the triple-digit 100 percent rate. faselst, This statement is a threat of a military coup. If France's Le Monde Oct. 24 commented that this figure someone would have predicted to me six months ago was an underestimation: inflation is already topping that Israel could have a military coup, I would have 120 percent. laughed. Now, I wouldn't laugh." Particularly devastated are Israel's municipalities. In an interview with the Jerusalem Post Oct. 12, The Local Authorities Union, the central coordinating Neeman was frank about his policy toward all the body for Israeli cities, has resolved to shut down city territories that Israel conquered in June, 1967, including services in protest against the government's refusal to the Sinai areas recently returned to Egypt under the provide adequate funding for repayment of accumulat­ Camp David accords. "All these territories must be ed municipal debt. The pro�austerity Finance Minister, annexed to Israel: the Golan, Judea and Samaria and Simcha Ehrlich, has ridiculed the municipalities' claims Gaza must not be relinquished. The arguments against that they have 14.2 billion Israeli pounds in outstanding annexation are largely spurious." debt. The mayors of the towns and cities have countered These words are not coming from an ordinary Gush by planning a "protest action" against the government, fanatic, but from a man who has a major impact on the which, according to the Jerusalem Post Oct. 16, will Israeli scene. Neeman is the "evil genius" of Israel. He mean "action to paralyze services," including nonpay­ has been involved for two decades in procuring nuclear ment of October salaries to city workers and nonpay­ bomb and super-sophisticated computer technology for ment to contractors doing vital work for the munici­ Israel's military and intelligence services, acting in col­ palities. laboration with the most advanced scientific institutions in Great Britain, the United States, and, earlier, France. Surfacing of the "doves" This "father of the Israeli atomic bomb" argues, con­ In response to the grave crisis fa cing Israel, Israel's vincingly to the minds of a stratum of Israeli military "doves" and British-linked "realists" such as former and strategic planners, that Israel must be a "mini­ Fo reign Minister Abba Eban have begun to awaken super-state," as large as possible in size, and able to from a slumber that set in with the 1977 rise to power control key developments in the Arab world, such as of the hardline Likud party and the 1978 signing of the high-technology acquisitions. Camp David accords. They have not yet addressed the Second, Neeman has in fact captured key elements country's economic problems, but have concentrated . in important parties in Israel. Factions in all of the their fire on Israel's r�lations with the Arabs. Likud Party's main components-Hetut, Liberal, and Recent meetings have taken place at which the La'am-are either officially or unofficially working "doves" have mounted a challenge to the Labour with Neeman, and the Gush-oriented younger-genera­ Party's refusal to work towards negotiations with the tion base of the National Religious Party (NRP) is Palestinians on a Palestinian state. At one meeting, overtly pro-Neeman. This has pushed the NRP oldti­ Yassi Sarid exclaimed, "A Palestinian state will be set mers, including Camp David · "autonomy" negotiator, up whether we like it or not. The Allon Plan (a Interior Minister Yosef Burg, into a more extremist traditional Labour platform which calls for annexation posture vis-a-vis the occupied territories and relations of approximately one-third of the West Bank-ed.) is with the Arabs. According to the Jerusalem Post Oct. not realistic." 17, the Renaissance Party is a "bigger threat to the Earlier this month, Eban authored a piece for the NRP" than to any other party in Israel. Jewish Chronicle, mouthpiece of the British Zionist Third, Neeman is receiving sympathy from an iden­ community, which urged Israel to "take for granted" tifiable extremist faction in the U. S. Zionist camp. that a Palestinian state would come into existence and According to an Israeli source, "the same people in the to work for the creation of an Israel-Palestine-Jordan U. S. Zionist movement who like Gen. Alexander Haig "Benelux" arrangement. like Neeman, and for the same reasons." The source Addressing himself to the Allon Plan, Eban noted noted that Haig will be a keynoter at the Zionist that "if you ate going to demand 33 percent (of the Organization of America's Oct. 24-28 International West Bank) you might as well demand 100 percent. Leadership Conference in Miami, Florida and that Yo ur chance of getting Arab agreement to the one is no "many of the organizers of that conference lean toward greater than your chance of getting it to the other." Neeman in their political views." -Marie 8urdman

Oct. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Middle East 25 the dominance of the non-Jewish world. ... In later years I had dealings with eminent leaders of non-Jewish peoples and countries .... I cannot remember any en­ counter ... when I had the least feeling of inferiority. I Goldmann: Zionist recognized that they were different, and in most cases more powerful, but never that they were superior." challenges the Zionists This self-conception, plus a self-professed bent to­ ward "neo-Kantian realism," has put Goldmann on the front-line of global Jewish affairs, as opposed to the Nahum Goldmann, the Zionist leader who has been more confined orientation to Palestine of most Zionist outspoken in his criticism of Israeli government policy leaders. From his standpoint, Goldmann urged the in a series of statements to the press this year, brings to creation of a World Jewish Congress, which came into bear seventy years of experience in Zionist and Israeli being in 1936. From the same standpoint, he has been politics in his critique. Goldmann has been involved in frequently, bitterly critical of the fixations of some of the Zionist movement since the World War I period, the Zionist movement's top leaders. beginning with activities in Frankfurt, Germany. Thus, in his autobiography, he sharply attacks hard­ According to accounts in his autobiography, "Sixty line Zionist ideologues for their direct responsibility in Years of Jewish Life," written in 1969, Goldman always the death of millions of Jews "by their failure, in 1937, differentiated himself from the more narrow and con­ to accept a British offer for the partition of the territory stricted worldview of most Zionist leaders and rank­ of Palestine into separate Jewish and Arab homelands. and-file. Goldmann claims that from his early years he Goldmann is against this "inability to compromise, the developed an "absence of a Jewish inferiority com­ determination to hold on to every inch of Palestine as plex .... I have never been subject to the Jewish fear of something historically sacred, an unwillingness to re-

and whose border would be guaranteed by the peoples of the world, primarily by the superpowers. It is to be counted among the political errors of my life, that I did A return to Geneva not stand up for this idea ...... (In 1949) the United Nations voted fo r the crea­ -Nahum Goldmann tion of a Jewish state, without even having consulted the Arabs. Here began our Original Sin (or downfall) . Among those in attendance when Mr. Nahum Goldmann . . . (The political isolation of Israel is increasing, only addressed a synagogue in Cologne, We st Germany in the United States is still giving Israel support, and who November, 1978, was Helmut Schmidt, the nation's chan­ knows for how long. The Arab world is ever more ce/lor. The fo llowing are excerpts from Mr. Goldmann's polarized, nations such as Saudi Arabia and Jordan are remarks: waning in their pro-American positions. Oil prices are rising more, with catastrophic consequences for the . ... I would like to make a new peace proposal for west. On top of all this, the delay in gaining peace has the Middle East. It may appear to some very contrived, led to visible demoralization in Israel, a growth of or even impossible. As far as I am concerned, despite organized crime, of the Mafia, of tax evasions, and so its boldness, it is the only hope for solving a problem on . which has concerned the world public for the past 30 ... An American-Russian collaboration, such as that years. which lay behind the Vance-Gromyko Declar,ation of . ...To day, I am more and more convinced that the October 1977, is according to my view, irrevocable; it course which Israel has taken over the past thirty years would have provided an excellent basis for a compre­ of its existence to reach peace and normalization of its hensive peace, but, was defeated unfortunately by the relations with the Arabs, is false, and thereby con­ Jewish Lobby. demned necessarily to failure. It is my view that only an entirely new approach ... (In 1949) I envisioned a Jewish state, which would can lead to a solution. I propose that the United obligate itself to permanent neutrality; whose existence Nations reconvene the Geneva Conference ...

26 Middle East EXECUTIVE INTelLIGENCE REVIEW Oct. 30-Nov. 5, 1979 ckon with realities." By contrast, Goldmann defines Arab-Israely relations for a decade. himself as the man who "finds a formulation by which -an insistence that Israel come to grips with the everybody gains something." "reality" of living in the midst of an Arab majority. The 1937 dispute with the Zionist hardliners stood Goldmann has concretized this in his "confederation" Goldmann in good stead once Israel became a state. idea, in related proposals for the "neutralization" of Since the early 1950s, he has taken several important Israel, and in more recent proposals that Israel negotiate initiatives and a sharply dissenting stand on a number the creation of a Palestinian Arab state with the Pales­ of key issues: tine Liberation Organization, under the framework of -the negotiations with West German Chancellor international security guarantees made by the U.S., the Konrad Adenauer fo r monetary restitution for the Nazi Soviets, and continental Europe. holocaust against the Jews. Many Zionist leaders were The overriding limitation of Goldman's policies is against any dealings with Germany at all. This laid the his softness toward BritishFa bian methods-the under­ groundwork for Goldmann's later good relations with side of his "Kantian realism." At one point in his members of the German and French governments. autobiography, after he attacks the Zionist leadership -negotiations of a "Near Eastern Confederation" fo r failing to make adequate overtures to the Arabs, he with Egyptian President Nasser, through the mediation comments, "If the Arabs were Englishmen, peace could of Indian leader Jawaharlal Nehru. in the early 1950s. have been concluded between them and Israel long The deal fe ll through because of Nasser's lack of ago." Such a viewpoint could hardly endear Goldmann confidence that Goldmann could "deliver the goods," to those Arabs who resent British manipulation of i.e.,. win Israeli government support for the idea. And, Arab-Zionist tensions for the past century, and who in truth, Israeli Premier Ben-Gurion was more intent rightly resent the Zionist movement's historical eager­ on launching the Suez expedition agaist Nasser jointly ness to play the role of British front-man in the Middle with Britain and France, a decision which embittered East.

LaRouche invites · ..The goal of the conference would be negotiation Gold mann to tour of a comprehensive peace in the Middle East which would not only be guaranteed by the United Nations, Lyndon H. LaRouche, Jr., an independent candi­ which is too weak to give it credibility, but above all by date for the Democratic presidential nomination, the two superpowers, and by many other nations, has announced that he intends to cosponsor a primarily the Europeans .... nationwide speaking tour for Mr. Nahum Gold­ · ..Parallel to the neutralization of Israel, some kind mann to make available to the internationally of Palestinian state structure-whether in connection prominent Zionist leader a public forum to present with Jordan or independent-would have to emerge, his proposals for the solution of the Middle East should the Palestinians have the option of deciding for crisis. themselves whether they similarly would want to take "While I do not always agree with Mr. Gold­ advantage of the same guarantees which also protect mann's views on many matters," Mr. LaRouche Israel's existence .... explained on Oct. 16, "I consider his contribution · . .In contrast to the cold warriers, I am convinced vital in upgrading the level of debate on which that the Soviet Union has a moderating influence over our Middle East policy in particular ought to be the Arabs, and prevents them from plunging into a new discussed. Mr. Nahum Goldmann's views, if pre­ war. In the past year, Foreign Minister Gromyko has sented to the American public, would contribute officially committed the Soviet Union on two occasions significantly in getting a real discussion on the to guaranteeing and ratifying a peace treaty between Middle East going . this country. Israel and the Arabs. "I also wish to invite my Republican counter­ Only such a comprehensive solution, as I propose, part, fo rmer Governor John Connally of Texas, as will give peace in the Mideast a chance. The treaty well as Senator Jesse Helms, to join me in cos­ which Begin and Sadat have concluded will be psycho­ ponsoring a nationwide speaking tour for the logically unacceptable for the other Arab states, and respected Zionist leader," Mr. LaRouche conclud­ leave Israel isolated in the Near Orient as a foreign ed. entity."

Oct. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Middle East 27 A statement from the editors of Executive Intelligence Review

Is the Fed's Vo lcker actually insane?

The time has come to balance the accounts on Federal One fo rmer Carter supporter announced his intent Reserve Chairman Volcker's recent depressing measures. to switch to LaRouche, another proposed to discuss No matter what deceptive label Volcker and the Carter making such a switch, and other members of the administration choose to stick on the bottles of Dr. audience simply walked away in disgust. Volcker's horse linament, Vo lcker's package is by no Eizenstat's departure was followed by a rush trip by means "anti-inflationary." Directly the opposite: it is Vice-President Walter Mondale. Mondale scheduled a the old "stagflation" President Nixon's Friedmanite series of events. As the questioning began during the period carried to extremes. first of the scheduled events-again, on Volcker's meas­ The foremost question in many people's minds is: ures-Mondale closed down the meeting. It was an­ what effect will this have on the November 1980 general nounced that the remaining scheduled events were elections-and on the primary elections now coming up cancelled. fast. Among businessmen, trade union leaders and many other sorts of responsible spokesmen, the question How bad is Vo lcker's recession? is asked, is Volcker's bumbling the result of mere incompetence, or the result of something worse? If we consider only the surface of Volcker's announced Already President Carter's re-election effort has been measures, his actions will cause approximately 15 per­ badly damaged by the spreading anger against Volcker's cent recession of the U.S. economy during 1980. The measures. Otherwise, comparisons of 1980 to 1929 will contraction will not occur in the area of churning fill the media as well as private conversations around speculation, not in the inflationary flows within the the nation. internal economy-the contraction will cut flesh and bone out of basic production and employment. If a significant further increase in oil prices charged A sign from New Hampshire by the multinationals occurs, as is probable, the reces­ Two events, outside Manchester, New Hampshire, dur­ sion will probably reach a 30 percent decline during ing the past week, highlight the kind of devastating 1980, most of this directly reflected in increased unem­ effects the Vo lcker measures are already beginning to ployment. If Vo lcker goes all the way, as he appears to have on President Carter's re-election effort. be doing at the moment, if he institutes capital controls, The first incident occurred in the context of White blocking foreigners from loaning or investing in the House staffer Stu Eizenstat's recent trip to New Hamp­ U.S. economy, the U.S. dollar will become equivalent to shire, presumably to bolster the Carter-Mondale effort. "counterfeit cigar coupon money," and anythi�g could The incident in question occurred at the outset of the happen as a result of the kind of chain reactioq this question period, as Eizenstat addressed a meager gath­ would trigger. ering of about 40 locally prominent and other figures It is important to emphasize that Volcker's measures who were presumably supporters of the Carter re-elec­ will not halt the growth of inflation. As businesses are tion effort. After the third question, all three focused reduced in sales volumes to mere or below the breakeven on the Vo lcker measures, Eizenstat rudely closed the point, they will be left with no other alternative but to meeting. go bankrupt or to raise their prices sufficiently to cover

28 U.S. Report EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 the usurious borrowing costs they face merely to main­ present world hyperinflationary spiral. Second, while tain turnover of essential operating capital. halting the purely monetary problem, we must reverse There might appear some leveling off of the rate of the post 1958 trend in employment back to emphasis inflation growth over some weeks. This could be the on high-technology employment of skilled operatives in perceived effect of large-scale inventory limitation by job places based on capital-intensive investment. cash-strapped firms. The present dumping of automo­ Every percentile of the labor force shifted to oper­ bile inventories is an example in this period. However, ative categories in high-technology, capital-intensive once inventories are reduced, the combined effects of employment has a double effect in reducing structural rising energy costs, rising borrowing costs, and a con­ inflation. It not only lowers the ratio of overhead costs, tracting market fo r consumer capital goods will force but converts the same overhead costs into wealth-cre­ prices up at faster rates than during previous phases of ating production. the Carter administration to date. Volcker's measures have directly the opposite effect. The best possible estimate at this moment is that a They savagely contract employment in production of new skyrocketing of rates of inflation will begin to take real, tangible new wealth, and concentrate a much off during or at the end of January 1980. larger portion of total money flows in the economy into the hyperinflationary churning mass of high-yield sheer nonproductive speculation. We saw the cruel logic of Causes for hyperinflation this in Nixon's "stagflation." Carter and Volcker have It is merely economic common sense that measures like carried Nixon's Friedmanite blunders to a wild and Vo lcker's must cause the rate of inflation to skyrocket. deadly-dangerous extreme. Sin� approximately 1957-58, the overall trend inside There is only one way in which Volcker's measures the U.S. economy has been of shrinkage in the percentile could lead to a halt in inflation: a depression worse of the total labor force which is productively employed than that of the 1930s. Such depressions stop inflation as operatives in agriculture, industry, mining, construc­ to exactly the extent that they bankrupt pension funds, tion, and transportation combined. Meanwhile, early wipe out savings and loans associations, eliminate per­ 1960s rates of increase in productivity of operatives, haps two-thirds of our savings in commercial banks, then approximately 7 percent improvement per annum, and wipe out hundreds of billions of paper capital, has slipped because of lack of capital-intensive invest­ especially real estate investments, with help from un­ ment, growing obsolescence and related considerations. employment rates along 1931-1933 lines. The result is that the portion of the labor force allotted to administration, services, and sheer waste has grown at the expense of the percentile of the labor force producing tangible, real values. Although administra­ "There is only one way tion and certain services are necessary overhead costs in which Vo lcker 's measures in both private firms and society otherwise, these costs are not costs for production but are overhead costs. So, could lead to a halt in inflation: the ratio of overhead costs to produced value has been rising at an increasing rate since about 1957-58. This is a depression worse than the underlying structural cause for the inflationary that of the 1930s. " trend in the internal economy. There is also a second cause for inflation. This involves not the average costs of production, but it involves monetary inflation outside the realm of pro­ Therefore, watchful observers tend to ask themselves duction. In addition to money flowing through the whether Volcker, Miller and Carter's economic advisers economy for wages and other direct and indirect costs are merely incompetent or downright insane. of production and distribution there has been a mon­ strous self-feeding growth in the ratio of money and Is Volcker insane? credit flowing to areas of speculation which have no cause-and-effect relationship to production of wealth. Paul Volcker may be incompetent. He is incompetent in Curing inflation means, first, bleeding away money the same general sense that economist Lawrence Klein, flows from speculative, nonproductive areas. This is the John Kenneth Galbraith, and Milton Friedman are first, indispensable, short-term measure for halting the rightly to be regarded as "quacks" in their chosen

Oct. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW u.s. Report 29 profession. Their so-called economic theory is not only policy-objective, it represents a quality of evil beyond wholly unscientific, but any government foolish enough the comprehension of the ord,inary citizen. to fo llow strictly the kind of advice flowing fr om such Such evil men arid women as those witting guides theories will sooner or later find its economy in the sort of the RnA and CFR far exceed the late Adolf Hitler of miserable mess ours has attained. and Heinrich Himmler in the magnitude of their mon­ It would be a mistake to go no further than that in strosity. explaining Volcker's hideous policy. In one sense, Volcker Such genocide is the inevitable consequence of the is all too competent. The inflationary misery his policies "conditionalities" policies of the International Mone­ will bring to the United States during the early 1980s tary Fund, and the "appropriate technologies" double­ is not the result of Volcker's miscalculations. He has talk of Robert S. McNamara's World Bank. Such gen­ plainly stated earlier his adoption of a policy of "con­ ocide is also the conscious intent of those monsters in trolled disintegration" for most of the world's economy Peking who planned and directed the mass murder of as well as the economy in the United States itself. more than a third of the population of Kampuchea Volcker is engaged in the deliberate sabotage of our (Cambodia) during a three-year period. The less severe economy, and of our national security. correlative of Third World genocide is the sort of For that, Volcker should be promptly impeached. literally fascist (Schachtian) "fiscal austerity" Volcker Unfortunately, the policy of "controlled disintegration" and his acco mplices are currently working to impose is not Volcker's alone. It is the stated and argued policy upon the United States. This same genocide in the of the New York Council on Foreign Relations (CFR). Third World and fascist austerity in the United States A neo-Malthusian ruin of the U.S. economy as well as is the inevitable consequence of tolerating the "small is the world economy, is the stated objective of Cyrus beautiful" cultism of Zen Buddhist governor Edmund Vance, Zbigniew Brzezinski, W. Michael Blumenthal, "Jerry" Brown, Jr., or of tolerating tl1e antinuclear and and the other principals supervising the 1975-76 writ­ related antics of Jane Fonda and her friends. Without ings for the policy of "controlled disintegration" which nuclear energy for the Third World, hundreds of mil­ presently govern the Carter administration as a whole. lions there will die of economic genocide. Without Behind Volcker and the CFR's "controlled disinte­ nuclear energy in the United States, our nation will die gration" policy stands that same neo-Malthusian policy as a nation. which led the notorious Club of Rome to propose that The best-known example of the kind of evil under­ the world's population must be reduced in the order of lying Volcker's policy is the case of the late Bertrand as low as one billion persons by the year 2000. The Russell. Russell, the intellectual father of modern Ludd­ London Royal Institute for International Affairs (RnA) ism, and international terrorism, typi fies, like Aldous also adopted that same policy of mass genocide in its Huxley, in the extreme, that extreme "one-world" pseu­ "Project Year 2()()()" policy guidelines. The CFR was do-philosophy which proposes not only to return hu­ created as the U.S. branch of the RnA at the close of manity to pre-Raphaelite medieval barbarism-before World War I, and the CFR remains de facto a branch the rise of the nation-state-but to destroy language's of British foreign secret intelligence to the present day. cognitive content and to saturate populations with That is not opinion or interpretation, that is simple, drugs and evil cults as means for keeping barbarized massively documented fact. popUlations under least-cost forms of social control. What is the purpose behind such criminal forms of Antinuclear fanatics, promotion of marijuana, LSD, moral insanity? Although the London crowd and its and so forth are the hallmarks of the modern kooks CFR allies are adequately power-hungry, their outlook bent on turning the clock back to barbarism-at least, and motives cannot be explained in terms of the simple for most of the survivors of neo-Malthusian genocide. motives of fe ar and greed one might expect to locate Relative to bankers of the likes of Volcker, Russell among ordinary people. Behind the policies of CFR, appears a fanatical extremist. Nonetheless, the ,compar­ . and hence of Volcker, there stands a quality, profoundly ison is valid insofar as the extreme case of th.e evil evil, which exceeds all comprehension by the standard Russell aids us in comprehending the direction of of what we view as wickedness among the ranks of Volcker's own ideology. Russell proposes to ruin hu­ ordinary acquaintances. Genocide against up to three­ manity in his own evil way: Volcker and his ilk act to quarters of the human race over a 20-year period is push the world a significant step in the direction Russell monstrous enough, if unintentional. As a conscious proposed.

30 U.S. Report EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 substitute one actor for another, one "responsible pres­ EHects on the election ident" for another mere "responsible president." The . Perliaps most of the voters, even most of the approxi­ plot and the plotters managing the presidency remain ' mately 75 percent who are essentially moral, will be essentially unchanged. reluctant to think through the issues to those underlying Admittedly, the game has continued for decades points we have just summarized above. American voters since the death of FDR. Some presidents have managed during this century have adopted pragmatic habits of to have some impact on policy, President Eisenhower's thought for matters of daily life. They will vote against administration most notably, or have been at least Volcker and what Volcker represents, not because they occasional conduits fo r constituencies whose outlook is have comprehended the underlying evil Vo lcker's poli­ more or less counter to that of the CFR crowd, as cies represent, but because most ordinary citizens reject Secretary of State Rogers and Attorney General Mitch­ the hideous, depression measures Volcker has set into ell functioned in part under Nixon. motion. Many say, "This cannot be changed." Stochastic In fact, Volcker's policies are fascist, in the sense the reasoning! Under conditions of grave crisis, the major­ late Jacques Rueff, as well as LaRouche, have de­ ity of the people in this nation can rise up as they have nounced Schacht's fascist economics. The average voter at times during our past. This was the key tQ the success will perhaps not worry whether or not the label "fas­ of the American Revolution, to the establishment of cism" is attached-they will vote against anyone aligned our Constitutional Federal Republic, to the elections of with Volcker because they rightly hate Vo lcker's policies, . Monroe, John Quincy Adams, and Abraham Lincoln. and despise any banker or politician wicked enough to Now, we face the worst crisis in a century, far more seek to impose such "controlled disintegration" policies deadly than that of the 1930s. This fact will become upon our nation and its people. apparent, at an accelerating rate, to more and more of One hopes that that angered majority of our citizens our citizens during the coming weeks and months. will not make President Carter the scapegoat of their just wrath. In former days of European censorship, the period­ icals of the region created the institution known as the "Unfortunately the policy of "responsible editor." This functionary did nothing. He 'controlled disintegration ' is did not write, he did not investigate� He simply sat, waiting to go to prison whenever the censor might be not Vo lcker 's alone. " considerably annoyed at some part of the periodical's contents. Mr. Carter might be aptly described, in that context of reference, as our nation's "responsible pres­ In such a mood, we shall see in November 1980 the ident." kind of electoral manifestation we have not experienced If we consult the policy documents produced by since November 1932. The people will be moved to vote both the CFR and David Rockefeller's Trilateral Com­ the New York Council on Foreign Relations out of mission during the 1975-76 period, it is properly made continued control over our government. clear to us that Mr. , Carter did not initiate a single The CFR inner circle knows this. That is why they, important policy conducte

Oct. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW U.s. Report 31 Where they stand on Vo lcker's

As the impact of Fe deral Reserve Chairman Paul Vo lcker's States . ... I herewith submit a demand for the prompt "controlled disintegration" tight money policy began to impeachment of recently appointed Federal Reserve be fe lt over the past two weeks, various political figures, chairman Paul Volcker." economists, and news media have had the opportunity to demonstrate where they stand. Th e fo llowing is the line­ John Connally: up, fo r and against a policy that will cripple America's Through aide Julian Read : "The Governor (Le., Con­ industrial economy. nally) is 100 percent behind Vo lcker. Three days ago in Houston, Connally gave a speech defending Mr. Volck­ er's policies. And over the weekend, he issued a state­ ment saying that 'Volcker's policy is hard to swallow, Presidential candidates but necessary.' Connally sees inflation as the number one problem. High interest rates is the only way to stop Jimmy Carter it. Unemployment is necessary. ... We must knock the To New Yo rk Times, Oct. 10: "The number one threat to waste out of the economy." our national economy is inflation. Whatever it takes to control inflation, that's what I will do. To National Ronald Reagan Public Radio, Oct. 13: "There is no way we can avoid Refused comment until candidacy is announced. high interest rates." Through Jody Powell, Oct. 22: "I see no prospect that the President will change his policy Howard Baker: in support of the Fed, or their policy, or change the Fed Through aide To m Griscom : "Baker does support the Chairman." moves by the Federal Reserve with one reservation: that it's a shame we let the economy degenera�e to the point Ted Kennedy: where we have to drive up interest rates.' To Business Week, Oct. 22: "One of the leading problems in the country at present is inflation. The steps the Fed George Bush: has taken are not steps that I would differ with, "The action by Federal Reserve Chairman Volcker is a although we have to monitor this action extremely necessary step to curb the staggering growth in the rate closely over the next several weeks to see whether it will of inflation." put us over the brink and into a more serious recession. The administration ought to be considering what steps Robert Dole: it might take were that to be the case, thinking about Through aide Randolf Miller: "The Senator doesn't like stimulation-although it is not called fo r now." high interest rates, but doesn't know what else can be Through aide Carey Parker: "While we feel that Mr. done. So he is willing to stand back and see what Volcker and the Fed are currently operating off the happens. He does not intend to oppose the policy at charts, and their policies could do serious damage to this time." the u.s. economy, we have great confidence in Mr. Volcker and the Fed and are sure they will take necessary action to correct any defects in their policy before it is Other government figures too late." I

Lyndon H. LaRouche, Jr.: Sen. William Proxmire: Statement released, Oct. 20: "The Federal Reserve tight­ Press release, Oct. 10: "The strong policy steps taken money policies mean economic suicide for the United by the Federal Reserve this past weekend are absolutely

32 U.S. Report EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 credit policy

necessary if the board is going to bring the growth of money under control and reduce inflation. The increase in the discount rate to 12 percent, an all time high, and the application of marginal reserve requirements on Where are the real Democrats managed liabilities are certainly appropriate steps to be In 1976, as the campaign for the presidency was taken at this time." in full swing, Jimmy Carter pledged to implement the planks in the Democratic Party Platform. The R�p. Henry Reuss: following is a selection on the subject of credit To New Yo rk Times, Oct. 10: "I applaud the Fed and the rates and housing, taken from that official party treasury fo r their actions on Saturday." document.

Rep. William S. Moorhead: "The housing industry and construction work­ To New Yo rk Times, Oct. 10: "We seem to know better ers, among the hardest hit by the current reces­ how to cure a recession than how to cure inflation. 1 sion, could have benefitted by a genuine federal personally feel the gamble is worth taking." commitment to meeting basic human needs for shelter. ' Sen. George McGovern: "It is the purpose of this party and the plan of To New Yo rk Times, Oct. 10: "At some point, higher this Party's Platform to reverse this callous prac­ interest rates no longer serve any purpose except to tice of neglect. The economic policies proposed in guarantee a deeper recession. But I don't think there's this Platform will greatly enhance the chances for much we can do about it if the administration ' seems average Americans to own homes or to rent homes bent on this course." . at reasonable rates. "We must reverse the Nixon-Ford tight money Rep. John Conyers: policy, an important factor in our housing short­ Through press secretary Bill Kirk, Oct. 23 : "The con­ age. gressman is against the policy because it puts the crunch "The biggest reason for escalating housing on small business and it puts the crunch on everybody." costs is mortgage interest. Out of every housing dollar, 37 cents is spent on interest. With mortgage Rep. Pa rren Mitchell: rates pushed to the highest levels of the past Letter to Wan Street Journal, Oct. 11: "For years it has century, the notion that the public is served by been difficult to support the Federal Reserve because its high interest is a myth. Every time the mortgage modus operandi assured that its impact on the economy rate rises a single percent, three and a half million would be procyclical. ... Now 1 can be supportive, and more Americans are locked out of the chance to am confident that many of my House colleagues also own a home. will be." "That is why the Democratic Party's commit­ ment to a more accountable Federal Reserve Board, to price stability, to a housing administra­ Eco�omi.ts: tion free of scandal, and to reasonable interest I rates are essential to the effort to address our housing problems. Charles Schultz, chairman, President's Council of Eco­ nomic Advisors: "The basic thrust of what the Fed did was needed."

Oct. 30·Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW U.S. Report 33 Beryl Sprinkel, Harris Bank (Chicago): "I'm delighted." James Reston, Op-Ed, The New Yo rk Times, Oct. 14: "It is reasonable, in the present economic plight of the David Grove, advisor, Marine Midland Bank: "I ap­ nation, to control the supply of money and credit and plaud." to raise the cost of borrowing money to build a house Alan Greenspan, advisor, Presidents Ford and Nixon: beyond the means of most families." "The Fed had no alternative." The Washington Post, article, "Letting Harsh Medicine Robert Triffin, Ya le University : "Controlling the money Work," Oct. 14: "If the president can 'hang tough' long supply is the best way to fight a recession. Certainly, enough for the Fed's harsh medicine to work-as Carter initially if we are to brake inflation, there will be some said he'd do Monday-then the move could help cool difficult periods to go through. The sooner, the faster speculative fever and dampen inflation. But if Carter we do it, the less gradual approach we adopt, the better hints he may try to counter the Fed action, he could chance we have to succeed ...." blow the whole effort apart. ... Experts agreed the dramatic action was necessary to help dampen excessive Arthur Okun, Brookings Institution : "They had to do something in the tightening direction. The economy borrowing." 1 showed a lot more strength than expected it to." Joseph Kraft, The Washington Post, Oct. 9: "There was Joseph Pechman, Brookings Institution : "Volcker is head­ no good alternative to the dramatic tightening of credit ing in the right direction." announced by the Federal Reserve over the weekend."

Walter Heller, Advisor, President Kennedy: "I think the The Cleveland Plain Dealer, editorial, "Inflation Is Win­ Fed got itself into a position where it had to do this. If ning," Sept. 29 (written before Mr. Volcker's policy they had done any less, the world markets would have announcement): "Instead of holding down or cutting responded terribly negatively." back or demanding that banks maintain increased re­ serves, the Fed has gone along with the immense grow­ Murray Weidenbaum, American Enterprise Institute: "I ing demand for credit. To fight inflation those in really don't have any criticism of Vo lcker's approach." authority must get tougher."

T he_press______Miscellaneous 1... ______1 I The New Yo rk Times, Editorial, Oct. 9: "The hope at Lane Kirkland, Secretary-Treasurer, AFL-CIO : "These the Fed, at least among the board's more pragmatic actions are the wrong move at the wrong time and will members, must be that this new show of determination not solve the problem." will dispel the atmosphere of crisis soon enough to avoid a need for more real restraint. If this message Van del S. Gravelee, President, National Association of fails to impress the people who count, unions pressing Homebuilders: "I never thought that I would see the for higher wages, speculators dumping dollars, con­ day when Americans would welcome a recession, but sumers spending as if there were no tomorrow, then the that seems to be the prevailing view of the administra­ Fed will have to make good its threats and drive us all tion today. There must be a better way to deal with toward deeper water." inflation than tight money and high interest rates."

34 U.S. Report EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 lAW )

Senator Kennedy's protection racket in the Federal Election Commission

The Federal Election Commission, the "nonpartisan" Robert O. Tiernan is currently the chairman of the watchdog over the U.S. electoral process, has given FEC. He was the personal choice for the commission Senator Edward Kennedy (D-Ma.) a 25 to I advantage of House Speaker Tip O'Neill, a close Kennedy associ­ over every other declared presidential candidate in the ate. 1980 race, following release of a recent Advisory Opin­ Frank Thompson is chairman of the House Admini­ ion in which the FEC sanctioned the activities of the stration Committee which is the committee that passes "Draft Kennedy" committees that are springing up legislation regarding the FEC. Thompson is the prin­ across the nation. cipal sponsor of the Common Cause sponsored Obey­ Standing FEC policy is to limit contributions to a Railsbach bill and the Public Financing Act of 1979 declared presidential candidate to $1,000 per person. and he was chairman of the get-out-the-vote drive for But Kennedy, so the commissioners reason, is not a Kennedy in 1960. Common Cause has given him an A "presidential candidate." Therefore, the FEC has set a rating. $5,000 ceiling on individual contributions to the "Draft Kennedy" committees. Moreover, the FEC rules allow Yo u scratch my back ... the same individual to make five different $5,000 con­ Two prominent Capitol Hill figures recently gave this tributions to the Kennedy committees-one to each of reporter a glimpse of how the FEC operates as a the five "independent" committees. The Carter-Mon­ "protection racket" for the Kennedy machine. Kennedy dale committee to Reelect the President has sent up a supporters interested in forming "Draft Kennedy" com­ howl of protest over the decision, mittees are given free legal advice by FEC staffers who Such untoward bias is not without its explanation. are otherwise reluctant to do the same for supporters of No less than three commissioners are aligned with the Republican contenders John Connally, Ronald Reagan Senator fr om Massachusetts and it is Kennedy's and others. As one Reagan campaign staffer comment­ congressional network which watches over what elec­ ed: "Everyone knows its Harris ... He's always on the toral legislation is passed. Consider the fo llowing per­ FEC premises ... never leaves. He's .the power there, sonalities. him and his legal assistant William Oldaker. Tom Harris is an FEC commissioner who was the Senator Kennedy is not shy about returning the personal choice of Kennedy's Common Cause and the favor either. In his keynote address to the May 1979 Senate Rules Committee to draft the 1971 Federal national conference of Common Cause, the institutional Elections Campaign Act that fo rmed the FEC. Earlier fo rce behind the FEC's formation, Common Cause he served under Paul Porter in the Office of Price member Kennedy singled out founder John Gardner Administration. Porter, a fo unding partner of the law fo r praise: "We strongly need the kind of leadership firm of Arnold and Porter, was one of John F. Kennedy's provided by Common Cause. I was inspired by John closest friends. Harris, general counsel to the AFL-CIO Gardner and the idea of developIng a citizens' organi­ fr om 1948 to 1960, was also a personal associate of zation to insist that government institutions be respon­ Newton Minow's dating back to Harris's stint as asso­ sive to citizens." ciate general counsel to the Federal Communications Kennedy's "inspiration" has made him the leading Commission, headed by Minow from 1961 to 1963. spokesman for Common Cause legislation in the U.S. Harris and Minow share the view that "equal time" Senate. Two such bills, the Obey-Railsbach bill and the should be eliminated to prevent so-called frivolous Public Financing Bill of 1979 would put s�vere financial candidates and issues from being aired. limits on the ability of "special interests" and especially

Oct. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Law 35 industrial lobbies to make contributions to the candi­ campaign financing for congressional, mayoral and date of their choice in congressional-not just presiden­ U.S. presidential candidates. The data he accumulated tial-campaigns. while serving as director of his Citizens' Research Foundation became the basis for later work by Gard­ Who's behind the FEe ner's Common Cause. The FEC was created by the Federal Election Campaign Newton Minow was President Kennedy's hand­ Act of 1971 as an institution to monitor campaign picked choice to head the Federal Communications contributions under the joint and presumably nonpar­ Commission (FCC) from 1961 to 1963 and provided an tisan control of Congress and the President. In 1976, it important interface with the presidential commission. was reorganized by Congress after Edward Kennedy Minow was very influential in shaping the 1960s "Aspen personally intervened so that its mem�rs are now decision" whereby the court allowed the television appointed by the President alone. In the same year, networks to determine what campaign issues were sig­ public financing of persidential campaigns was passed nificant and thereby which candidates would be . cov­ into law as part of this electoral package. Jimmy Carter ered. The Aspen decision, named for the Aspen Institute is the FEC's first finished product. for Humanistic Studies, provided the opening crack in Since the Carter election, the FEC has increasingly the equal time regulations of the 1934 Federal Com­ become an agency for harassing electoral campaigns munications Act that guarantees equal time coverage considered "too frivolous" through selective enforce­ to all candidates and issues. ment of a nightmarish web of arbitrary and contradic­ Now in private practice with the Chicago law firm tory regulations surrounding every political act. On of Sidley and Austin, Minow is still the major outside behalf of ridding politics of "special interest" pressure, consultant to the FEC, the FCC and Common Cause the FEC is functioning to minimize-to zero-the role as they prepare a joint campaign to eliminate equal of the citizen in supporting and voting for the candidate time provisions in presidential campaign debates. (The of his choice. FEC and the FCC share jurisdictional powers in these So whose (bad) dream was it? televised debates.) Two ideas put forward by John Gardner in his book In his book Equal Time, Minow proudly describes Common Cause provide the answer. Gardner advocated his close relationship to President Kennedy and the financial disclosure as a means of discovering the Congress in these electoral law areas: " ... I went into identity of contributors and vendors, ostensibly to elim­ the office on easy personal terms with the President inate "special interests" from the American political himself and many other members of the administration, process and the creation of a' fe deral agency to oversee the Senate and House of Representatives ... this advan­ this; and public financing of presidential and congres­ tage was only accorded to a few other past FCC sional campaigns to ensure that neither Democrats nor Commissioners ... including Paul Porter." . Republicans can afford to disassemble this agency. In 1972 the Fe deral Election Campaign Act was Gardner began as early as 1968 to lobby for just · passed, based on the work of Kennedy's presidential such a federal agency. Drawing on funds from the Ford commission, the 1968 founding of Gardner's Common Foundation and the Carnegie Corporation, and appar­ Cause, and the group's mobilization for reform. With ently with advice fr om John J. McCloy, director emer­ the opening of Congress in 1974, the campaign to give itus of the New Yo rk Council on Foreign Relations, the FEC some clout by instituting public funding of Gardner began to piece together the network that congressional and presidential elections went into high would launch the FEC. Kennedy network involvement gear. has been crucial at several points. Common Cause beat the drum against vested inter­ John F. Kennedy was the first President to call for ests that were allegedly buying up the Congress. Those an FEC. In 1961, Kennedy formed the Presidential opposing a beefed-up FEC, like Rep. Wayne Hays, were Commission on Campaign Costs which, after one year's removed fr om office-by scandal if necessary. In the investigation, led to the call from Congress for the first same year, the Supreme Court declared the FEC uncon­ federal election commission "to scrutinize" congres­ stitutional but then allowed the agency to be reconsti­ sional financing. Leading members of the commission tuted as an independent executive agency to which were tied to Gardner and would later, in 1968, work Congress could not make appointments. Edward Ken­ with him in fo unding Common Cause. Three of the nedy introduced the legislation to reconstitute .the FEC most important commissioners were Paul Porter, men­ and those commissioners, including Tom Harris, who tioned above in connection with FEC Commissioner had served an initial term already were reappointed by Harris, Herbert Alexander, and Newton Minow. President Ford. Alexander was appointed to the commission by Now today, the FEC is little more than Kennedy's Presjdent Kennedy on the basis of recommendations protection racket. from John Gardner and John J. McCloy. Alexander's -Karen Manne specialty was and is computer profiles of political

36 Law EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 Are oil prices

1980 out of control?

How the multis made their record profits in driving the independents out

Tl.1e multinational oil companies this week posted prof­ business; the windfall profits tax only hits profits made its for the third Quarter that are so high that oil analysts from domestic oil production. Curiously, not a word in Wall Street investment houses are terming them from Washington or the press has appeared on foreign "shocking and embarrassing." Exxon reported a 118 tax credits which enables the multis to engage in percent profit increase for the third quarter, Continental international oil production and trade virtually tax free. posted a jump of 134 percent, and Standard of Ohio As experts in the oil industry are well aware, the 190 percent! windfall profits tax will not hurt the multis, but will Such record profits are directly related to the dra­ destroy the smaller independent producers, historically matic climb in oil prices over the course of this year, the ones who explore for 80 to 90 percent of the U. S. particularly during the early summer oil shortage hoax. produced crude. The price hike is due to the increasing rate of speculative oil trading on international spot markets where the Behind the spot market bubble largest integrated oil companies have made a killing. According to a former employee of Exxon, as early as The oil producing countries, Europe and Japan have 1974, the Seven Sisters cartel of multinationals was all condemned the oil majors for their increased prof­ distributing written secret documents elaborating poli­ iteering and market manipulation. cies which this year have been enacted to break up the Over the last three weeks the price of spot purchases "integrated" nature of their elaborate marketing sys­ of crude have reached as high as $40 a barrel with no tem. This entails primarily the process of severing third relief in sight. The Journal of Commerce reported on party contracts of oil sales between companies to "bal­ Oct. 15 that if prices exceed this level, OPEC is sure to ance the market." enact a new price rise at its mid-December price-setting Such a move throws the world markets into insta­ parley. bility, the result of which is that the multis bid against In the United States last week, Saudi Oil Minister one another for oil purchases in greater and greater Ya m ani stated that the markets were going out of volumes on the spot market. The Council on Foreign control as a result of the spot market momentum. The Relations, a prestigious policy making body in New Indonesian Oil Minister Adimir Adin is quoted in the Yo rk City which is known to represent the corporate Journal of Commerce saying that OPEC will not raise boardrooms of the Seven Sisters, produced a series of its prices but will allow "market forces"-the spot studies called the 1980s Project on world politics and market-to set pricing trends. economics. In their volume on oil politics, written in 1976, is a description in great detail of the current A Catch-22 chaotic market situation. The study terms it "the second The administration and the media are responding to oil regime" whereby the "integrated structure" of the the announcements from the major oil companies with oil industry is severed and the cost of energy soars. a more vigorous campaign for a windfall profits tax on The key to realizing this plan was the shutdown of oil company profits. Such a demand is misplaced since Iranian exports earlier this year. As a result, British the profits of the multis are primarily from foreign Petroleum initiated the move to break third party

Oct. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Energy 37 agreements, followed by Exxon, Gulf, Mobil, and Royal earlier this year, Joe Roeber reported on the growing Dutch Shell, which reverberated throughout the oil importance of the spot markets in world trade, partic­ industry. The net result was to force companies with ularly the European spot trading center associated with refineries and petrochemical installations onto the spot the Amsterdam-Rotterdam-Antwerp importing and re­ market fo r competitive bidding against one another for fining center. Roeber noted that a new reality is pres­ precious cargos of crude at increasingly higher and ently impinging upon oil markets in which the major " higher prices. The spot market in normal times only oil companies are taking a more dominant position in accounts for about 5 percent of total world trade and trade. As a result, many smaller independent companies is used by companies to make across the counter which have traditionally gained the necessary margins transactions of crude not covered by long-term contract. of crude to feed their refineries off spot trade are According to a New Yo rk analyst, well over a million finding themselves threatened by powerful, newly es­ barrels a day of crude have been added to the total tablished trading subsidiaries of the multis. volume traded on spot terms because third party con­ An aide to a top international oil consultant last tracts were sever�d. The Wa shington Star reported on week commented that the expanding rate of spot trade Oct. 16 that as high as 24 percent of the total volume and the commensurate reduction of third party sales of crude sold on world markets now goes on spot. represents a "revolution" in world oil. The Pe troleum Throughout the course of this year, average spot Intelligence We ekly reported on Oct. 8 that as early as transactions for crude oil have never dropped below August of this year Royal Dutch Shell initiated a move $30 a barrel compared with OPEC's average $20.48 to impose hefty surcharges on those third party con­ price. tracts which have survived. The weekly notes that certain unnamed multis have since then attached pre­ A new reality miums on third party sales of up to $8 a barrel. Le In a" series of artcles printed in the Petroleum Economist Monde on Oct. 9 cites Exxon, Gulf, and Shell as having

New reality in world oil d weaker ones, consolidating and concentrating the rel­ Multis consoli ate atively few strong traders-particularly those with spot m,arket control access to fu nds from a strong parent company. Lead­ ing traders without such strong integrated corporate Fo llowing are excerpts of an article that was part of a financial backing are a rarity, Bulk Oil, and Vitol three-part series in the Petroleum Economist. Authored being the most obvious examples. Traders with U.S. by Joe Roeber and titled " Dynamics of the Rotterdam links are important, with Coastal States leading a field Market," this installment appeared in the Fe bruary that has such names as Petrosun (Sun Oil), Derby issue. Th e series discussed international spot trade cen­ (Englehard), Northeast Allied (Hess), Anschutz and tered in the controversial Rotterdam spot market. Tampinex (Ingram). This was the trend last year, and it probably remains the underlying trend . .. . The policies of the refiners toward the market have adapted to the new realities. Having allowed independents to perform a function that logically belonged within their own systems, they have re­ Independents to be bought up claimed large parts of it, by tightening up their own trading activities and even setting up trading subsidi­ H. A ndrew Th ornburg, senior vice-president of Security aries (Shell with Petra, BP with Anro, and Exxon with National Bank, this month delivered his assessment of Impco). They learned to adopt more conscious and financial requirements fo r energy companies, given controlled policies towards the spot market, selling as higher exploration and prodUcing costs and a rece,ss)on­ little and buying as much as economics and opporq,n­ ary economic environment, Mr. Th ornburg, speaking ities dictated in order to avoid swamping it with before the Pa cific Energy Association at San Diego, surpluses. With unused capacity to play with, they paints a grim picture fo r smaller oil producers in the could tune refinery runs more closely to demand and U.S. Below are excerpts of reportage fr om the Oct. J 5 store their own surpluses. issue of the Oil and Gas Journal's coverage of the " The result for traders has been to shake out the speech.

38 Energy EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 willingly accepted offers of spot sales from Iran at over to Carter's energy program and, in particular, the $36 a barrel, a sop to the Iranian price hawks who have windfall profits tax on oil company profits reveals the admitted selling 15 percent of their exports at spot complicity of such figures as Senator Russell Long (D­ prices up to $40 a barrel. La.) with the multinationals. The Finance Committee under Long's leadership has formulated a series of The spot market and decontrol exemptions from the tax (which is slated to capture A -New Yo rk-based international oil consultant has windfall profits following price decontrol) which only stated that the effect of removing government controls benefits Big Oil. on the price of U.S. produced oil will amount to Moreover, the actions of the Committee, known to transforming the U.S. oil market into one giant spot be weighted with pro-oil industry senators, adds incen­ market. To date, 20 percent of the 8 to 9 million barrels tive to the trend toward higher prices. First, all new oil a day of U.S. produced oil is fetching an average of $30 found since 1973 is exempt. Expensive-to-extract oil a barrel with the short-term trend in the upward direc­ which the multis are presently exploring for will be tion. given the financial backing of the government. Across Over the next 20 months, barring a reversal by the the board, the multis claim that it will require at least next administration of President Carter's decision to let a $30 a barrel market price to make this new category price control measures lapse, all U.S. oil prices will rise of crude "economical." in accordance with the prices resulting from oil com­ Second, the Committee has approved numerous pany competitive bidding. A similar trend, says a former measures to foster conservation which, in effect justify top government energy official, will occur after 1980 the trend toward higher oil costs. with respect to natural gas. Third, the committee has only exempted the first The recommendations taken by the influential Sen­ 1,000 barrels of stripper crude (oil from wells which ate Finance Committee over the past weeks with respect produce less than 10 barrels a day) from the windfall

Although inflation is "out of control," interest rates are high, and productivity has declined, Thorn­ New York banker sees tight credit burg said that "even with these concerns it is easy to squeeze on independents affirm that adequate financing will be available for the industry as a whole, but it won't necessarily, be An investment analyst with Manufacturers Hanover equally available to all segments of the industry. sees the impact of the recent increase in interest rates as The most efficient use of funds by the petroleum fo rcing the independent oil producers out of business. We industry, he said, will be development of conventional quote: sources of oil and gas, even though the discovery rate has been declining. At a 15 percent prime lending rate and with the Decontrol of oil and gas prices and reasonable tax soaring cost of materials not to mention spiralling legislation are required, however, for such develop­ taxes, the smaller oil producers just can't do it. Many ment to occur. of them, even if they are exempted from windfall Thornburg predicted hard times ahead for inde­ profits, won't be able to make it-not in this environ­ pendent producers, although they should find ade­ ment. They were already being forced to sell out long quate financing at least during the early 1980s by before the advent of the 15 percent rate. using their own cash flow or by borrowing against Now, the government is looking to enhance the reserves. industry's search for domestic oil, but finding and "Ultimately, as the cost of drilling increases and pumping remaining reserves here is so damned expen­ discovery rates fall, more and more of the independent sive no little guy could hope to get into this ball game. companies will leave the industry," he said. The current trend in the oil leans toward the bigger "Today, independents with proved reserves, espe­ companies with the profit margins to lease land and cially those who lack the capital to develop existing invest in expensive exploraton. I wouldn't be surprised properties, are prime targets for acquisition." to see buy ups of smaller companies by the majors as Independent marketers and refiners also may have time goes by, particularly if current economic condi­ problems. tions persist. Thornburg said, "they must face the fact that higher prices are going to discourage the use of petro­ leum products. And this calls into question the advis­ ability of investing in additional refining capacity."

Oct. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Energy 39 profits tax, which means all middle-sized independents "acquisitions." The recent buy up of the tiny California running larger, more productive wells will be taxed out company Belridge Oil by Shell for a whopping $3.6 of existence, leaving only the "little guys and big oil." billion is just the first. Belridge ,reportedly controls reserves of California heavy crude to the tune of 360 Multinational corporate consolidation million barrels. The purchase occurred just weeks after A grim assessment for the independents was given this the administration decontrolled the price of heavy month by a California investment banker to the Pacific crude. Energy Association. He predicted that severe recession­ The only difference in the long term between future ary economic conditions, fostered by Federal Reserve acquisitions of independents by the multis and the Chairman Volcker's recent moves, coupled with massive Belridge purchase is that as credit tightens further and increases in production costs would force many of the inflation worsens, the purchase price of such acquisi­ smaller U.S. independent oil companies out of business. tions will go down markedly as the multis' profits and Under these circumstances, he anticipated that many oil prices climb higher. valuable independent oil producers would be ripe for -Judith Wyer

Spot oil prices reach $26.27 a barrel to match the top price set by Libya ... a barrel The African producers often move in tandem in $50 pricing petroleum, and representatives df the three TheJollowing are excerpts of an account of growing met recently in London to discuss fo urth quarter . chaos on the international spot markets which appeared prices. Sources said that Nigeria had agreed to hold in the Wall Street Journal, October 26. prices where they were if Algeria would do the same ... The oil market is near chaos fo llowing the collapse Nigeria notified contract buyers of its crude oil of price stabilizing efforts by the Organization of early this month that prices for the fourth quarter Petroleum Exporting Countries. would be the same as in the third quarter ... "It is a complete shambles," a crude oil trader How much longer this restraint will hold in view with a major oil company said ... of the Algeria action isn't known. Meanwhile Nige­ So far this month, five of OPEC's 13 member rian and other African crudes are being sold on the states have increased official crude oil quotes in what spot market at prices of about $40 a barrel. So are appears to be a new round of price leapfrogging in the Iranian crudes ... the producers group. But until this week, only Libya Published reports in Iran yesterday said that a had broken the $23.5O-a-barrel "ceiling" established cargo of Iranian crude had been sold at $45 a barrel. by OPEC last June in an effort to stabilize runaway Some U.S. crude-oil trading sources said they under­ oil prices for the second half. .. stood the Iranians were asking $46 to $48 a barrel Oil buyers had been hoping, however, that others currently, and one source said he has heard the price in OPEC would continue to honor the ceiling. That is as high as $50 a barrel ... hope vanished Wednesday when Algeria announced Trading sources said they expect a continued that the price for its key grade would be increased to spiraling of prices on other crudes, too.

40 Energy EXeCUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 · The view from the Federal Republic Our Bonn correspondent takes a look at the military strategy debate in Europe

Meetings of the Atlantic Alliance and NATO, running "counter" the Soviet capabilities. This means a freeze fr om Nov. 12 through to the fu ll NATO Council meeting on all negotiations with the Soviet Union for at least ending Dec. 15, are already promising to be the forum three to fo ur years since the West will not have the new that will demonstrate the growing malaise in the NATO weapons to deploy until 1983 at the earliest. Meanwhile, alliance, the manifest contrariety of basic political, the SALT II treaty still sways uncertainly in the Senate economic and military interests between the US.A. and breezes. its European allies. Public statements by a number of Simmering just under the surface of this NATO officials of the West German government in Bonn, from debate is an as yet unspoken concern of the Federal Chancellor Helmut Schmidt through his Defense Min­ Republic and all of Europe: The United States is ister Apel and Foreign Minister Genscher leave no becoming irrevocably committed to channeling Europe doubts as to the West German stance-and the Euro­ toward a "limited European theatre nuclear war" with pean stance-at the upcoming meetings on the imme­ the Soviet Union. It was understood that Henry Kissin­ diate issues at hand. ger spoke not merely fo r himself when he argued, In May 1978, Chancellor Schmidt obtained from during his performance at the Brussels meeting of Soviet General Secretary Brezhnev the written assurance Georgetown University's Center for Strategic and In­ that the Soviet Union was willing to negotiate a reduc­ ternational Affairs, that a war between the West and tion of the "continental strategic weapons" of the Soviet the Warsaw Pact would occur exclusively in Europe and Union. This readiness was reconfirmed in July 1979 not with the US.A. since the U.S.A. could hardly be when the Chancellor stopped over in Moscow prior to expected to invite a shower of Soviet ICBMs on North and fo llowing the Tokyo summit meeting of Western America by firing American ICBMs. Instead, nuclear heads of state. Leonid Brezhnev firmly offered negoti­ weapons in Europe capable of striking into Soviet ations on these weapons-technically called intermedi­ territory itself need to be installed to "counter" Soviet ate-range ballistic missiles-in his recent speech in East capabilities without reliance on American ICBMs and Berlin. Bonn is committed to "taking Brezhnev at his American or British submarine-based Polaris missiles. word" and will drive for a NATO resolution which It is an established fact that the Soviet Union has conceded to modernization of equivalent NATO weap­ not increased the numbers of their SS-4 and SS-5 ons if and only if the West simultaneously makes an missiles, but are modernizing by means of SS-20 missiles offer to negotiate with the Soviet Union. "And if the for action in the Middle East and especially against negotiations are successful," Chancellor Schmidt stated China. The basic commitment expressed by Kissinger in a We st German radio interview on Oct. 14, "then we and Brzezinski and the basic, consolidated tendencies will not need to implement everything that we decide of American foreign policy as a whole to implant on in the first part, perhaps very little of it ... in the weapons in continental Europe to militarily back up the ideal case, none of it. ... This policy will be implemented "Camp David" Mideast policy and the "China card" by the alliance, and Brezhnev expects that," the Chan­ Asia policy is a commitment to a geostrategic confron­ cellor stated. tation with the Soviet Union. The position of the US.A., as publicly stated by National Security Council chief Brzezinski, is the precise Policy disintegration opposite: There are to be no negotiations with the It is on this issue that a fundamental and unbridgeable Soviets until the West has already installed a number of gap exists between the interests of continental Europe extended-range Pershing II and Cruise missiles to and Anglo-American geopolitical interests. Yet this issue

Oct. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Europe 41 remains in the �ackground, only indirectly addressed Schmidt, that "if the intention of the Western alliance despite the clarity of public statements by government to build up its arms were actually carried through, then officials in Bonn on the military security interests of the Soviet Union would have to view this as a change, Europe and the legitimate military security interests of a fundamental change in the strategic situation, and the United States. then, in such a case, the Soviet Union would have to In his recent interview with the London Economist, take the additional steps necessary for its own security. Chancellor Schmidt was very direct on economic issues. ... I am therefore quite confident that Brezhnev wants But on issues of military strategy, he confined himself to use the time of three to four years to negotiate. Our to the remark that "military balance of forces" and declaration of intent can, in the intervening period of strategy are not limited to weapons systems but include three to four years, be changed, be reduced, if progress a whole range of economic issues as well. in negotiations permits this or even makes it necessary." " Privately, high-ranking officials or German military institutions are concerned that the US.A. is destroying Will to d.tente its own basic industrial capacities, its domestic and Such a statement represents anything but "finlandiza­ export potentials. The US.A. is "drifting away," it is tion" or "neutralization" of Germany. Schmidt is de­ said. manding that the US.A. measure up to and act on its The only way to bridge the chasm in military own real interests. "SALT I, SALT II, the Four-Power security interests is for the United States to reverse its Agreement on Berlin, for example, none of this would economic policies. "The U. S.A. makes even the Federal ever have been possible without the American will to Republic, this most stable and strongest of all world detente. And this is a will that is continuous, one we economies, look like a midget in terms of its economic can recognize in the presidency of President Nixon, potential. But this is only potential. Tricks," reflected in President Ford, and even that of President Carter," the Camp David and China card military policies, "will Schmidt added. "The American President is deeply not realize that potential." convinced of the necessity of maintaining the military It is up to the United States to reverse its own balance of fo rces in Europe. . .. I know that he is just economic and military policy disintegration. In the as powerfully convinced that, on the basis of this meantime, neither Bonn nor Europe generally will balance of forces, detente must be carried forward with tolerate the military destabilization of Europe. "We the Soviet Union and her allies." cannot, out of our own long-term interests in detente There is a consensus in the Federal RepUblic on this. in Europe," Chancellor Schmidt said during his radio The American "will to detente" is the issue and that interview, "allow the Western Alliance to degenerate means ratification of SALT II by the Senate. In Wash­ step wise into a purely American-German affair." Ger­ ington, West German Defense Minister Apel stated that many will not be isolated and forced to swallow the the alliance is going to plunge into a profound crisis if "limited nuclear war" fantasies and will instead ensure SALT II is not ratified. "The facts are these," say that negotiations with the Soviets occur, as Brezhnev military officials, and there is no disagreement what­ offered again in his "world important speech" in East soever in the government. Berlin. "The chief impression I have," said Schmidt, Nor is there any disagreement that a NATO reso­ "is that Brezhnev, with great persistence and energy, is lution to modernize American "theatre nuclear forces" acting to assure that his life's work, his life's work of will be a declaration of intent. The Bonn government the Western policy of the Soviet Union, of the Soviet has no other po�t of view than that expressed by the policy of detente, is not put into question. Social Democratic Party's military expert, Alfons Paw­ "Persons play a great role. If persons were unim­ elczyk who just returned from arms control discussions portant, it would not matter to us who became US. in Moscow: "The NATO resolution is to state that the President. If persons were unimportant for fo reign European nations of NATO agree to stationing inter­ policy, it would not matter if Franz Josef Strauss became mediate-range ballistic missiles to be developed by the Chancellor. I do not think that it doesn't matter .... The United States on its own responsibility under condition issue here is Brezhnev's life work and I think that the that they will not be deployed if arms-control negotia­ line which General Secretary Brezhnev is pursuing is tions lead to satisfactory results." very clear and easily recognizable." -G. �regory, For Brezhnev and the Warsaw Pact, the issue is, said Bonn correspol!dent

42 Europe EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 An 'independent Europe' - Kissinger style

An alliance of forces led by former U.S. Secretary of ful John Connally is functioning in connection with the State Henry Kissinger has squared off against the CSIS operation. government of West German Chancellor Helmut At a conference in Brussels last month on the future Schmidt. Confronted with Schmidt's uncompromising of NATO sponsored by the CSIS, Kissinger provoked support fo r both West Germany's traditional friendship an international scandal by saying that the U.S. "nuclear with the United States and detente with the Soviet umbrella" was no longer reliable for Western Europe. Union and Eastern Europe, Kissinger's grouping is Kissinger did and still argues that Europe must deploy demanding a "decoupling" of Europe fr om the "weak" some 600 American medium-range nuclear missiles on United States. They are dedicated to replacing Europe's its territory so that war could be waged on the European sovereign republics with a feudalist "Europe of the continent even if the U.S. lost its nerve. Rejected out of Regions" in which limited nuclear warfare and other hand by the Soviet Union, this "limited nuclear war" "limited confrontations" could take place without doctrine is widely viewed in Europe as an insanity "fear" of superpower use of strategic thermonuclear which would turn the continent into a radioactive weapons. rubble field. Kissinger's allies in this deadly conspiracy include Kissinger has spent most of his time since his Franz Josef Strauss, who is running against Schmidt in Brussels speech giving interviews and speeches in West next year's elections for Chancellor as the candidate of Germany. In one interview to the Frankfurter Allgemeine the Christian Democratic Union and Christian Social Zeitung on Oct. 13 he urged Europe to take a more Union parties; Otto von Hapsburg of the Pan-European active Mideast policy, so that ways can be found to Union; certain Jesuit networks within the European ensure Western oil supplies without resort to the Carter Catholic church, and their American cousins at the administration's lOO,OOO-man intervention strike force Georgetown University Center for Strategic and Inter­ which Kissinger called "inadequate." Kissinger has national Studies (CSIS). Republican presidential hope- demanded an oil price rise as essential to convincing

against a NATO "China Card" policy while appear­ Cool reception for Hua ing on Italian television with former Prime Minister Giulio Andreotti. Said Schmidt: "We believe China Chinese Premier Hua Guofeng failed in his tour of is important, but so is the U.S.S.R. There are stupid Europe to promote Peking's "world war is inevita­ persons in the West who believe in playing the China ble" policy. His visit to France began with a "wel­ card against the Soviets ... we don't want to be coming" speech by President Giscard d'Estaing, who manipulated by the Chinese against the Soviets ..." strongly praised Euro-Soviet detente. Two days later, On Oct. 20, West German government press French Foreign Minister Jean Fran�ois-Poncet reaf­ spokesman Klaus Boelling said that Bonn would not firmed French and European commitment to "the allow the country to become the site of a Sino-Soviet irreversible process" of detente. controversy. China, said Boelling, must know very Openly soliciting aid for a Chinese military build­ well "West Germany's position toward detente." up, Hoa was instead offered a credit line for non­ Hua's official Oct. 22 welcome in West Germany was military technology and the opportunity to end his accordingly cool. Chancellor Schmidt did not greet involvement with the remnants of Pol Pot's fallen the Chinese leader at the airport. Only brief private regime in Kampuchea. The French press reported meetings between the two were held. Social Demo­ that the two heads of state "did not agree on cratic Party leader Herbert Wehner made West Ger­ anything." A last minute diplomatic meeting called many's perspective on Hua's visit clear: "There will by Giscard apparently changed little. definitely be no shift of our detente policy with the Before the Chinese Premier had arrived in West East European countries. We don't want to move Germany, Chancellor Helmut Schmidt warned into the trenches against the Soviet Union."

Oct. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Europe 43 the American public of the "seriousness" of the energy that Schmidt is weakening NATO by seeking detente crisis, and has paid lip service to nuclear energy as the with the Soviet Union and Eastern Europe. This, com­ only real alternative for the future. bined with the alleged inadequacy of the U.S. nuclear These statements parallel John Connally's widely umbrella, means that Europe must look to its own publicized call for a new approach to the Mideast crisis defenses, and must acquire the new medium-range which would include some kind of Palestinian state missiles which U.S. National Security Adviser Zbigniew within the context of a militarized Mideast region-a Brzezinski is demand�ng, says Strauss. At a recent program drafted with Kissinger's assistance. Connally meeting of Strauss' CSU party arms policy panel, a too has touted a pronuclear line. party spokesman declared that NATO in its present This policy has been echoed from the Jesuit corner. form is dead, and must be replaced by a common Last week, CSIS professor G. Heumann gave a speech European defense command structure based on joint in Hannover, West Germany entitled "The Middle East Franco-German control of France's nuclear weapons. After Camp David," denouncing the present agree­ The second tactic in Strauss' campaign is to argue ments as unworkable and calling for the creation of that Schmidt's support for nuclear energy is a com­ some version of a Palestinian state. Heumann, a long­ mendable policy, but that Schmidt cannot get his own time associate of Kissinger, is slated to begin an organ­ Social Democratic Party (SPD) to support his nuclear izing tour among American Zionist organizations when policies. In fact, the SPD is riddled through with he returns to the United States. environmentalist "greenies," who are expected to mount a significant challenge to the Chancellor at the party congress in December. Strauss the 'European' Meanwhile Strauss is waging a level of diplomatic In West Germany, Franz Josef Strauss has purged his activity intended to give him the aura of a "shadow campaign propaganda of some of its more overtly neo­ government." Chinese Premier Hua Guofeng stayed at Nazi overtones and is gaining avid support in his bid .Strauss' personal residence in Bavaria during his recent for the chancellorship from "liberal" press organs rang­ visit to West Germany and last week Strauss met with ing fr om the London Guardian to the Hamburg weekly Henry Kissinger and the Israeli ambassador to Bonn. Die Zeit. Strauss' campaign focuses around the line -Susan We lsh

44 Europe EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 1Ar,,, AMERICA )

Secret conference in London maps Caribbean 'security' strategy British, Canadian and U.S. officials met in London last for political affairs under Henry Kissinger, toured the week under a veil of secrecy to map a Caribbean Caribbean area in late August to assess the extent of "security" strategy to isolate Cuba and "prevent the opposition to the United States and to pressure area outflanking of NATO in Latin America," according to governments into backing a cold war campaign against information received by Executive Intelligence Review. Cuba. Blacked out of the Western press, the talks are "contin­ uing," according to a brief statement released by the British brains, u.s. brawn State Department Oct. 19. Twoearlier rounds were held While Canadian and U.S. officials deny that the trila­ in Washington last May and June. The State Depart­ teral talks have any connection to the Carter admini­ ment's admission came after two days' refusal to com­ stration's decision to increase military activity in the ment on the hush-hush talks. region, no doubt U.S. policy is being shaped in these Discussion at the London meeting-whose sponsor meetings. Caribbean sources characterize the situation is yet unknown-centered on the following points, as a replay of the old 19th and early 20th century report sources close to the talks. "special relationship" between the United States and (I) Cuba has established significant influence in the Britain based on "British brains and American brawn." Caribbean area as a result of its leadership role in the The London talks occurred almost simultaneously with Non-aligned Movement. the high profile land-sea exercises at Guantanamo Bay. (2) Increasing ties between OPEC nations and Third The meeting was addressed by Sir Neil Cameron, head World non-oil�producing countries, following the Ha­ of Britain's combined military forces who has a repu­ vana Non-aligned Conference, represent a threat to tation as an anti-detente spokesman and advocate of NATO. the "China Card" against the Soviet Union. Britain (3) International Monetary Fund and World Bank and Canada are behind the proposal to create a regional lending "conditionalities" must be strenthened as a "naval patrol" -using the Coast Guard forces of lever of political coercion. "friendly nations" in the Caribbean-training for which (4) Britain must assume primary responsibility for is beginning in Barbados along the outlines of a British­ the British Caribbean, that is, its fo rmer colonies and drafted security plan. This would be a complement to members of the Commonwealth. the Joint Caribbean Joint Task force set up in Florida (5) Jamaica, Guyana, and Grenada are "problem by the United States after Carter's Oct. I "Cuba crisis" countries" in the region, because of their opposition to national address. IMF conditionalities and their diplomatic relations with and support of Cuba, particularly in Third World Two Step Strategy fo rums. While Grenada and Guyana can be forced to This is one facet of a "two-step" strategy to reassert change policies without changing governments, Jamai­ American-NATO-control over the region as outlined ca represents a "different case." in Jimmy Carter's special Presidential Directive 52 that Although a list of attendees is not available, it is orders an effort to isolate Cuba and undercut its grow­ known that two high-ranking U.S. State Department ing influencein the Third World. While displaying U.S. officials were present in London: senior diplomatic capability, and readiness, to deploy militarily against troubleshooter Philip Habib, and deputy-undersecretary any perceived "security threat," Washington is scram­ for Central American-Caribbean affairs, Brandon bling to put together a "democratic" alternative to Grove. Grove was formerly a European desk officer at Cuba's "radical" influence in Latin America. As the the State Department. Habib, undersecretary of state United States learned in Nicaragua, military interven-

Oct. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Latin America 45 tionism will, at this point, only feed the growing anti­ American, anti-IMF "rebellion" and could provoke a serious backlash in relations with Europe as well. U.S. promotion of "democratic change" is seen, however, only a temporary tactic to establish the meas­ ure of control and credibility neededto move militarily State Dept. hand against any country or political fo rce that backs Wash­ ington's policies ... in the name of "defending democ- racy." in EI Salvador coup . . The ongoing General Assembly of the Orgamzatlon of American States, meeting in La Paz, Bolivia, is the Although State Department official Hodding Carter III scene of American diplomacy to create a "moderate firmly denied any role of the United States government democratic" counterweight to Cuba around the five­ in the EI Salvador coup last week, evidence is mounting nation Andean Pact. The U.S. delegation, led by Sec­ that shows differently. retary of State Cyrus Vance, is trying to convince the As early as September, in testimony before the Andean countries to issue a "set of economic and House International Affairs Committee, Viron Vaky, political principles that would stand in contrast to the undersecretary of state for Latin America, cited U.S. so-called Havana Declaration of Nonaligned Countries. special interest in Central America due to its "geopol­ . The Havana Declaration attacked the IMF condition­ itical proximity." Vaky warned that the feudal-hke struc­ . . alities, demanded creation of a new monetary system, tures and overwhelming poverty of countrIes hke EI and posed advanced sector intensive aid to Third World Salvador lead to growing polarization and opposition industrial development as the only remedy for world from the population. Since "change is inevitable," Vaky recession. stressed, the United States must promote "peaceful Vance is also trying, according to the Washington change compatible with individual liberties and demo­ Star report, to sell the Andean pact countries on "Wash­ cratic values." This was an implicit refererence to ington's conviction that the former colonial powers in Secretary of State Cyrus Vance's policy that no ore the Caribbean, Britain, and France, joined by such ?I "Nicaraguas"-radical, sweeping away of the dommant countries as Canada and Japan, should play an active oligarchical institutions-would be tolerated. role in providing coordinated technological and eco­ Sources close to the State Department report that nomic assistance to the mini-states of the area." Vaky made EI Salvador his "number one priority'' after The paradigm for Washington's "democratic" tactic, . the overthrow of Nicaragua's dictator, AnastaSIo So­ is last week's "moderate, centrist" military coup in EI moza in July. Both Vaky and William Bowdler, special Salvador, a coup run largely through Venezuelan-allied envoy to Central America, took charge of efforts to Christian Democratic and Jesuit networks. Washing­ . secure "peaceful change" in the country, supersedmg ton supported and encouraged the coup against repres­ the U. S. ambassador to the country. Flying "in and sive dictator Gen. Romero in order to preempt another out" several times in the last three months, Bowdler popular revolution on the order of Nicaragua. It is and Vaky first tried to pressure the now-ousted Romero expected that the United States will now renew military government to grant token concessions, and later met aid to EI Salvador on the grounds that the "human with Christian Democrats, liberal businessmen, and rights" picture has improved. military officers to form a "moderate" replacement for the Romero regime. -Mary Goldstein According to as yet unconfirmed reports, the U.S. Military Assistance Advisory Group (MAAG) delega­ tion to the country, which handles relations with the EI Salvador military, was beefed up in the last several months. One specialist on EI Salvador reported that the Carter administration went so far as to lay down "conditions" on the composition of the new. junta. Washington emphasized that the military representa­ tives on the junta must come from desk officers, men whose distance from troop command and the army's repressive role would give them some credibility before the population. (That condition was met.)

v 46 Latin America EXECUTIVE INTELLIGENCE REVIEW Oct. 30- No . 5, 1979 A Jesuit combination The leading "think tank" force that has emerged behind the new junta is the Jesuit order, centered around local representatives of the order's University of Central America. The university's rector, Roman Mayorga, is one of the three civilian members in the new five-man . The U.S. 'reappraises' go�ernment. And a core of "very bright" economists from' the university is being cited as the brains behind the operation. UPI reported that Jesuits provided the relations with Jamaica "spiritual counseling" to the officers involved in the coup. Immediately upon the return of Jamaican prime min­ This Jesuit role, along with the support of the ister Michael Manley from the Nonaligned summit in related Christian Democratic party, is the key to what­ Havana in early September, a decision was made in ever credibility the new government will be able to Washington to "reappraise" U. S. relations with Jamaica. garner in the eyes of the country. Observers note, That "reappraisal" has already led to a decision that however, that Jesuits pose one of the more dangerous Washington, working with London, will work to remove features of the new government. The religious order is Manley from power, and replace him with a government notorious for its historically held advocacy of a medi­ more easily controlled, according to reliable reports eval world order in which the oligarchy dominates a emerging from the recent London security conference. poor and superstitious peasantry. Manley's "pro-Cuba" speech in Havana is the usual . The rest of the Latin American continent is not at reason cited fo r the policy review, but the real reasons all supportive of the new EI Salvador junta. Regional go beyond this. Since the Havana summit, Manley has observers have already dubbed the whole affair the :'EI made clear that he is committed to the creation of a Salvador model" -Washington's new method of hold­ new international monetary system as agreed upon by ing off the vast social and economic changes in the area the nonaligned as their program. that development will require. For Manley this is crucial as the only way tet) relieve

international economic situation with its dangerous Latin nations reiect nsequences for international trade, rising inflation gunboat diplomacy and worsening energy crisis. These perils can have a negative effect on the Brazilian situation." Saraiva Washington's gunboat diplomacy in the Caribbean rejected as "interventionist policy" the idea of cre­ has not met with cheers in Latin America, even from ating a standing Latin American military "peace­ some of the continental "big powers" traditionally keeping" task force. aligned with the United States. Fidel Castro's chal­ Even more striking is the opposition from Ve ne­ lenge to the developed nations to industrialize the zuela, regarded as a friend of Washington. Ve nezuelan Third World struck a strong chord throughout the Defense Minister General Rangel Burgoin adamant­ continent. As Peru's president Francisco Morales ly rejected Ve nezuelan participation in any force to Bermudez-who has tolerated the IMF "condition­ police the area, declaring that he found no strategic alities" for three years-candidly said, Castro was threat whatsoever in the few Soviet troops in Cuba. speaking for the views of the entire Third World on Ve nezuela has "no interest in participating in the economic policy. conflicts of other states," he said. Brazifs foreign minister, Ramiro Saraiva Guer­ The Herrera Campins government in Caracas reiro, told reporters in New Yo rk City Oct. 2 that refused to sign scientific agreements with the United Brazil is more concerned about "the international States for fear of appearing to support Carter ad­ economic crisis" than about the possible security ministration policy in the Caribbean. And a sched­ threat from Cuba. "Our borders are calm and we uled policy address by the Ve nezuelan energy and are capable of guaranteeing the security and well­ mines minister in Washington has reportedly been being of our people," said Saraiva. "The only thing canceled in protest to Jimmy Carter's "roughrider" we are concerned about is the deterioration of the policy.

Oct. 30-Noy. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Latin America 47 his country from the rule of the International Monetary D.K.'s resignation from the post of secretary general of Fund. Last year, the fund assumed daily control of the the party in 1977 was one of the conditionalities im­ economic and financial operations of the country. posed on Jamaica by the IMF. Jamaica sits on the Coordinating Bureau of the Nonaligned Movement, a body upgraded at the recent Washington's response summit to hold greater exeuctive powers. Thus Manley Washington is now putting extreme pressure on the is in a position to exert international influence for a Manley government ..On Oct. 15, Secretary of State New International Economic Order. Manley's trip this Cyrus Vance called in Jamaican foreign minister Patter­ week to Iraq and Libya has caused speCUlation that son for talks in Washington. Matters of "bilateral Castro's proposal for a $300 billion development fund concern" as well as the present state of the world is ' high on the agenda, in addition to bilateral cooper­ economic system" were the reported discussion topics. ation in oil, bauxite, and technical development. Manley Last week, Manley's leading opponent. Edward Sea­

has stated that the start of a serious dialogue between ga of the Jamaican Labour Party. also paid a . courtesy" members of OPEC and the non-oil-producing countries call on assistant secretary of state for Inter-American of the Third World was one of the most important Affairs, Viron Vaky, to promote his bid to replace achievements of the Nonaligned summit. Manley. Manley also has a close relationship with many In September a consortium of banks announced African nations, and has maintained channels with they were cutting otTnegotiat ions on the refinancing of Europe. $450 million of Jamaica's debt, as well as rejecting the extension of a new $200 million loan. Investment in Breaking political conditionality Jamaica, the bankers said, would wait on the resump­ As he moves in concert with the leadership of the tion of some signs of growth in the economy, presently nonaligned movement, the Jamaican prime minister is steeply declining. trying to shore up his domestic situation. Since the In the past two years, living standards have dropped IMF took daily control of the country, Manley has been one-third, and this is the major source of instability for significantly weakened due to the extreme harshness of the Manley government. It is the primary reason that IMF conditionalities on the population. Now Manley Manley's party lost the landslide mandate it received in is relaunching his party's program for the development the December 1976 elections which swept Manley into of the country. This involves constitutional reform that the government. would make Jamaica a republic and end its current Now the Jamaican Labour Party (JLP) is promising relation to the British monarchy. The queen and her to return to power and return Jamaica to its colonialist representative, the Governor General, still rank over status. JLP columnists are already discussing in the the prime minister, according to Jamaica's current con­ Jamaican press how to bring down Manley before 1981, stitution. claiming that recent demonstrations they have called in Another factor in the Washington decision to re­ Kingston show their real support in the country. With move Manley is the election of D. K. Duncan to the a recent injection of funding, the JLP has launched a post of secretary general of the People's National Party tactic of continued mass protests against the economic last September, under Manley's urging. O.K., as he is situation and the Manley government. knowJ1. is one of the party's most popular leaders and The real danger, however, is the revival of terrorism, the a(.�nowledged head of the nationalist, state-sector used in 1976 by the JLP to force Manley to impose a oriented faction. With him at the head of Manley's state of emergency. The international press has already party, the chances of Manley pulling together a winning signalled that it is prepared to begin a "human rights" combination in Jamaica's 1881 elections is greatly campaign against Manley if he should move against strengthened. It is widely understood in Jamaica that rising violence in Jamaica.

48 Latin America EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 cO"flr•• 'fI.,." ,•• "C. )

Bircher larryMc Donald: it's done with mirrors Acting on marching orders issued by the "liberal" Ne w who has been the sole visible control, in controlling Yo rk Times, John Birch Society Executive Committee McDonald himself. member, Representative Larry McDonald (D-Ga.), in­ sert,ed the libelous criminal solicitations published by International terrorism promoted the Times into the Congressional Record. Again, re­ Exemplary ofRees' aid in promoting terrorism in the sponding to orders from the Ne w Yo rk Times' editorial United States is the latest disinformation on that subject of October 10, McDonald added his own echo, de­ which Rees caused "trilby" MacDonald to insert in the manding federal harassment action against the Demo­ Congressional Record. Following the party line dictated cratic Party presidential campaign of Lyndon H. La­ at a recent Jerusalem conference, McDonald lies in Rouche, Jr. asserting once again that international terrorism is Meanwhile, in New Hampshire itself, the John Birch entirely a product of the Soviet State Security Organi­ Society is working in close support of the "Draft zation (KGB), the Soviet version of the FBI. Mc­ Kennedy" forces' harassment of the LaRouche cam­ Donald's office issues the lie at the same time Western paign there. On one radio call-in show, a local right­ European antiterrorist services and judges have proven wing eccentric announced that his slanders against conclusively that international terrorism is controlled LaRouche were given to him by the Birchers,_ notably by a combination of British, "right-wing," Israeli and by the notorious Al Stang. In intelligence circles, Al Socialist International conduits. Stang is knowledgeably identified as one of four prom­ Although Western intelligence services do .report inent agents of the B'nai B'rith's Anti-Defamation Soviet and other East-bloc efforts to penetrate terrorist­ League, exerting significant controlling influence within linked circles in the Mediterranean and European re­ the Birch Society command. gion, this is understood to be merely a standard Soviet Although Representative McDonald himself is re­ practice of penetrating anything which might serve as garded by insiders as a weak-witted, credulous fo ol, a productive channel for Soviet intelligence entry into McDonald's Washington, D.C. office is a serious na­ high-level Western circles. tional security problem. Although MacDonald himself For example, the first of the present-day internation­ is mentally limited this incapacity merely makes him al-terrorist entities, the Basque ETA, was created during more efficiently a dupe for British intelligence's John the 1957- 1958 period under the direction of a group of Rees, the same Rees who manufactured Newark's Ima­ Basque-Jesuit priests. This action by one element within mu Baraka from the dejected, pathetic figure of black the Jesuit order is an aspect of the political operations existentialist playwright LeRoi Jones. Rees, together repeatedly denounced by the late Pope Paul VI, and with his ADL-linked sidekick, Herbert Romerstein, more recently denounced by Pope John Paul II in the played a significant contributing role in orchestrating context of his visit to Mexico. Continental Western the Newark riots. Since the end of his connections to Europe intelligence circles emphatically state that the the late "Peyton Place" author. Grace Metallious. Rees Basque, Breton and Corsican terrorists in France are has functioned as an intelligence operative for both the coordinated by British secret services, aided by elements anarchist "New Left" organization, the Institute for of Israeli intelligence, the Socialist International, plus Policy Studies (IPS), and later, out of McDonald's some nominally "right-wing" circles historically asso­ . office, as a major source of disinformation circulated ciated with the same OAS which was the principal into police intelligence circles. Since Romerstein moved conduit for various attempted assassinations of Presi­ away from McDonald's staff, it is puppet-master Rees dent Charles de Gaulle.

Od. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Counterintelligence 49 Defense of Italian terrorists her present career under the direction of the late Herbert Unfortunately, under the Carter administration, Cyrus Marcuse, himself one of the key intellectual figures as Vance's State Department has refused to cooperate with well as one who performed more substantial roles in Italian and other secret services in the fight against the development of international terrorism. Miss Davis terrorism. Quite the contrary, the anti-nuclear energy has also enjoyed, not surprisingly, the patronage of U.S. Ambassador to Rome, Richard Gardner, has re­ British intelligence, the same British intelligence chan­ peatedly intervened into internal Italian affairs on be­ nels which consolidated command of the leadership of half of Italian groups being prosecuted for terrorist and the Communist Party U.S.A. during the 1930s, making terrorist-linked activities. Former Attorney General the party a key element in the British-Canadian Special Ramsey Clark, carrying an official State Department Operati9ns Executive penetration into top circles of the "tag" during his contributions to putting the butcher Sovi<:t leadership. Ayatollah Ruhollah Khomeini into power, has also been a prominent behind-the-scenes orchestrator for Coming full circle defense of Italian terrorists, continuing his fo rmer con­ Miss Davis' operations are the centerpiece of a special nection to the legal aid of Baader-Meinhof and other grouping, within the Communist Party U.S.A. This international-terrorist groups in Western Europe. Also grouping was formerly linked to the terrorist training prominently linked to international terrorism is the operation at the Lincoln Detox center in New York City. "New Left" intelligence organization, the Institute fo r Miss Davis and her immediate circle are considered to Policy Studies (IPS), together with a spin-off of the be leaders by a terrorist nest deployed under the cover American Friends Service Committee, the Movement of the Michigan "Anti-Nazi" Coalition. All of these fo r a New Society. The Institute for Policy Studies, out operations intersect networks of both the Institute for of which the Weatherman terrorist group was spawned, Policy Studies and elements of the Anti-Defamation is not surprisingly a former nesting place of John Rees. League, as well as overlapping with the spin-offs of the There are, admittedly, certain Communist organi­ American Friends Service Committees' "Quaker Action zations which are linked ideologically to the cause of Project." international terrorism, including leading elements Hence, one comes full circle. The Larry McDonald within the Communist Party U.S.A. The CPUSA leader­ engaged in attempting to cover up for the real control­ ship is fo rmerly linked to Soviet Communist Party lers of terrorism, turns out to be a puppet of the same intelligence, most immediately the U. S.A.-Canada Insti­ John Rees fo rmerly significant in both the Institute for tute spin-off from the Communist Party's Moscow for­ Policy Studies and the coordination of the Newark race eign-intelligence arm, IMEMO. IMEMO was created riots. This is the same McDonald who manifestly takes under the direction of British secret-intelligence triple his marching orders from the Ne w Yo rk Times, a agents Maclean and Philby, and is the principal coor­ McDonald who attacks the same LaRouche prominent dinating center for British agents and British agents-of­ as an internationally-respected authority in fighting influence inside the command of the Soviet party. international terrorism. Among the Communists in the United States most Whether he has the intelligence to know that fact or closely associated with political sympathy for terrorists not, it is McDonald whose pedigreee links him to is Angela Davis. Miss Davis, formerly a protege of the terrorist controllers. His libels and slanders against American Friends Service Committee, was groomed for LaRouche amount therefore, to a trick with mirrors.

50 Counterintelligence EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 Making the news media report the news Pennsylvania state representative Joseph Zeller (D-Le­ The track record of the press has been one of poor high), has submitted legislation fo r " ethics" control over credibility for too many years and that is why A.I.M. news reporters in Harrisburg, the state capitol of Penn­ (Accuracy in Media-ed.) was created and our plan to sylvania. In an interview with Executive Intelligence introduce an Ethics Bill just as other states have. Review, Rep. Zeller explained why some fo rm of public It has become an accepted American tradition by accountability fo r newspaper and media reporters is nec­ editors to throw truthfulness to the winds when edito­ essary: "In many cases, the press doesn't report the rializing a story and has unfortunately "to the public news. .. they make the news." Therefore, like other who depends upon the press for the truth," brought officials responsible to the public, journalists-especially about a credibility loss. those dealing with political news-should be susceptible The first amendment has been seriously abused to some type of public, ethical accountability. Mr. Zeller whereas through it the press feel they are the judge, also explained that his legislation, fo r financial account­ jury and verdict and untouchable. ability covering the press in Harrisburg, Pa ., is a limited They are the only group in America who holds the ''fo ot in the door" toward this goal. In addition to his most power without regulations since the press is migh­ legislative career, Rep. Zeller worked as a reporter fo r tier than the sword and all they do is cry first amendment nine newspapers in the Allentown, Pa. area fo r 25 years, when challenged. and is currently a columnist fo r the Emmaus ( Pa.) Free Since the press is protected through the first amend­ Press. ment to be able to print the news, shouldn't it be the Th e statement of motivation delivered by Mr. Zeller news actually, not what the press wants it to be for to his legislative colleagues fo llows. whatever reasons to aid their cause. Example: Gloria Steinem-former national leader Since 1954 I've been representing the public through of NOW who stated in 1977, I quote: "Any legislator taxpayers leagues, councilman, mayor and legislator. who doesn't go along with our cause, write them up I've watched the press become militant and abusive and if you can't find anything, create one ..." towards any public official who challenges their views Members of the press say: Hey, I'm not paid by and biased reporting. Thus their present cry "foul" over public funds, you can't include me in an Ethics Code. my planned ethics code for reporters. Hold it-yes, you can. First, your very proJ�ssion is To o many newspapers fe el it is an accepted American protected in the First Amendment, but since it is, it tradition to throw truthfulness to the winds when must be credible since you are the most powerful group reporting news or pushing a pet project. Therefore, the that forms direction and opinions by the public. public views them as irresponsible and lacking in cred­ This same public votes for representative govern­ ibility; yelling when no wolf exists and hurting the ment and expects this group of people to represent public's right to know. them credibly. The press cries "Freedom of the Press" and "First If the press plays politics with certain groups, indi­ Amendment Protection" where my bill would protect viduals, fo r favors or a cause-what's the difference. that right, through reporters revealing sources of in­ Then they have violated a serious trust to .the public come; showing possible conflicts of interest. ... and we know it has happened so flagrantly that the I know my bill is unpopular with the media. How­ public has become very disillusioned with.the press and ever, I've never been afraid to face issues, if the cause just doesn't trust it. is right. Sure writers and editors can make honest mistakes,

Oct; 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Press 51 but we see a constant misuse of power and we feel the public through this Ethics Law may get better reporting and find who is violating this trust that is given to the press through the First Amendment. Doctors, real estate people and most professionals are licensed and Rep. Zeller: there is a need held accountable. The First Amendment to our Constitution says Here. Representative Zeller explains his legislation and "Freedom of the Press." However, with this power discusses the problem of coordinated political manipula­ comes responsibility since this amendment was designed tion by the media. to help protect the public from those who could exploit them . EIR: I understand why you have oriented the actual ethics When our forefathers over 200 years ago designed legislation narrowly toward reporters in Harrisburg. the our Constitution, the press was small, personal and Pennsylvania state capital. only. I would like to ask you effective. The editors and writers and publishers were some questions about the broader issues concerned with well-known, respected members of the community. To ­ how the press creates rather than reports the news. day with the monopolized giant news media we have Fo r example. I know that you were involved in helping found the press has become a questionable source of to bring about investigations into exactly what happened news in too many instances; they don't write the actual in the Th ree Mile Island nuclear plant incident. Th at was news, they make it. Therefore, there has become a an excellent example of the press creating a fa lse picture terrible and scary credibility gap which threatens the of the situation and misinfo rming the public. nation. Zeller: That is true. What has happened is that the press does not write the news, they make it. For example, from the "Burn, Baby, Burn" period of the 60s, a lot of the journalists who graduated from various colleges were involved in these campus strikes, are now editors, writers, at newspapers throughout the country and they The accountability bill have very liberal views. They are "shakers and makers" with regard to changes in the government, and so Amending the act of October 4, 1978 (P.L.883, they've gotten away from the first amendment, which No. 170), entitled "An act relating to conflicts of means the right and freedom of the press, and peoples' interest involving certain public officials serving right to know. They have abused that to the point that in State or State agencies and local political sub­ the people no longer have a right to know. They are division positions and prohibiting certain public supposed to, but the press doesn't think so. The press employees from engaging in certain conflict of thinks: 'we will guide them mentally the way we want interest activities requiring certain disclosures and to by the hogwash that we give out to them. We will providing penalties," requiring employees of the guide public opinion in the direction we want.' r news media who are regularly and ordinarily That's what happened with the various ter orist assigned to news coverage of the General Assem­ groups around the world and in this country. It's bly to file financial statements: happening all over and the press is part and parcel of The General Assem bly of the Commonwealth this whole operation, because it is infiltrated by those of Pennsylvania hereby enacts as follows: types of individuals. So I see the picture where they Section 1. Section 4, act of October 4, 1978 have eaten away at the first amendment, freedom of (P.L.883, No. 170), referred to as the Public Offi­ the press, and the right to know of the public. cial and Employee Ethics Law, is amended by adding a subsection to read: EIR : What groups and individuals. interest groups,forces. Section 4. Statement of financial interests re­ and so fo rth do you think are responsible fo r this? quired to be filed. (q) Every employee of the news Zeller: · The fact is that these people are tied into what media regularly or ordinarily assigned to news I call the "international operation" of a group of people coverage of the General Assembly sha11 file with who absolutely feel that there should be no growth in t the commission, the Secretary of the Senate and this country.... They're socialized into a socialis ic form the Chief Clerk of the House of Representatives of government, and "Big Daddy" is going to do a statement of financial interests for the preceding everything for them. They don't realize that the very calendar year no later than May I of each year. system that made them, that brought them to this point Section 2. This act shall take effect in 60 days. in time ...i s the capitalistic form of government. ..which has made it possible for these people to yak, to voice their opinions, to go to college, and so fo rth. They

52 Press EXECUTIVE INTELLIGENCE REVIEW Oct. 30-Nov. 5, 1979 for control of press power

don't understand this is the bottom of the pork barrel, public life. Therefore, the court said it was too far­ and the only way we're going to get the country back reaching and would violate the first amendment. . .. on an even keel is by the whistles in the factories Now the only area we're going to start with, as a blowing, by the guy going there with his lunch pail and fo ot in the door, is people-like some politicians in working and getting his paycheck, coming home and Harrisburg I of pay to do that. That is most needed being able to buy food and fibers for his family, being because the trouble is you have this unregulated press able to drive a car and buy a home and educate his monopoly ...th ey own senators, they own congressmen, children-that's the cycle. But these people don't see they own presidents, they own big companies. that. ... Here in Allentown (Pa.) the newspaper here, the Morning Call, owns most of the downtown area, they own most of the big department stores, the houses, the EIR: I know-and we've published reports on this-that in terms of this ideology you're talking about, it's coming properties ...Yo u have Phil Berman (business partner to fr om specific groups and individuals. Fo r example, the the owner of the Allentown Call newspaper-ed.) in Council on Fo reign Relations. Ninety-nine percent of the town, who owns Hess' Department Store, and he's very, board of directors and editors of the New York Times, very active with the Zionists. He is one of their big the executives of that publication, are members of the fundraisers in town. Both of them (Berman and the Council on Fo reign Relations. And also many of them are owner of the Allentown newspaper-ed.) are half-own­ members of various British "think tanks, " like the Inter­ ers of a new hotel they're going to put up in Allentown, national Institute fo r Strategic Studies, and the Royal and they're tied in together. I exposed the fact that they Institute of International Affairs, of which the Council on got a $3 million grant to put in a recreation program Fo reign Relations in New Yo rk is the U.S. subsidiary. in that section, and they're going to use the building fo r it as part of the lobby for the hotel. I ran with the Zeller: There's no question in my mind about this. expose. So when I shake them up like that you know I "gotta go." I'm targetted. They've got their political EIR: Th e other mechanism, in a sense more subversive, gun-for-hire writer out for me ..., is the Fund fo r Investigative Journalism, set up and fu nded by the Institute fo r Policy Studies, which specializes in what we call "political watergating, " that is, in fa bricat­ EIR: Th is sounds like somewhat of an anomaly since in ing socalled investigations. many small towns around the country, you find a fa irly Zeller: They do this all the time. honest and independent press. Wh at has happened is that the British are trying to buy out the media throughout the U.S. Morgan Guaranty bank is advising their British EIR: Th ese things work because the people who read clientel to buy up small U.S. newspapers, less than 100,000 these newspapers don't know who's running the "puppet circulation, and that the profitability is not in profits per show" behind the scenes, who's pulling the strings. How . se, but in the readership, the political influence. Of course can we make that known? the London Economist has been advising fr om some time Zeller: It's very difficult. For example, the 1973 case in now fo r the British to buy up America cheap .... Alabama (an ethics bill broadly aimed at all aspects of Zeller: Ye s, they're trying to get the United States back. the news media, which was ruled unconstitutional by the U. S. Supreme Court on first amendment grounds­ ed). It's very difficult for my bill to go through if I EIR: Th ey 're still trying to get control over the press that widen it to apply to all reporters, and all editors, and are not under the thumb of the Eastern Establishment all publishers. And I'll tell you why I directed my bill media, putting out the line to go fo r the small newspapers only to the state capitol and any reporter that works in in non-metropolitan areas. the state capitol. ...The Alabama law in 1973: as I was Zeller: They've got to get out in the boondocks. They're saying .. .it did get passed, but it was challenged by the going to start buying up small papers out in the Supreme Court and thrown out. boondocks because that's where most of your respon­ The Alabama General Assembly passed it in 1973, sible people are now .... They've destroyed the big cities and that would deal with all reporters. But what hap­ and got most of the people in the big citi� brainwashed; pened was the court challenged it under the first amend­ now they're going to head for the boondocks and

ment. ..beca use it got into people that didn't deal with destroy the responsible people out there .., .

Oct. 30-Nov. 5, 1979 EXECUTIVE INTelLIGENCE REVIEW Press 53 ( ASIA

India: Wo rld's largest democracy at the

Barring unforeseen circumstances, the Indian people, Gandhi. Ram's position is perhaps the weakest. Ram an electorate of hundreds of millions, will go to the himself is a figurehead with a personal appeal particu­ polls in early January to elect a new government. This larly to the untouchable caste, of which he is a member, election, a mid-term poll, comes less than three years but with a party which in reality consists almost entirely after the 1977 elections that swept from power Prime of the rabid Hindu chauvinist and communalist Jan Minister Indira Gandhi and the Congress party which Sangh party and his neofascist militia, the Rastriyo had ruled India since its independence. Sevak Sangh (RSS). The spectre of an untouchable At this moment the Janata party, which took over, running at the head of a party and organization with is a shambles, broken up into the various constituent a history of castism and narrow sectional appeal is not parties which originally came together to oust Mrs. what could be called a winning combination. Gandhi. Mrs. Gandhi is poised to reverse her defeat The Jan Sangh and RSS efforts to use the Janata as and reassume leadership of India. a cover for their attempts to seize political power during the Desai government was the issue that brought that government down. The frightening rise in communal­ The Contenders . for power Hindu versus Muslim-violence during the past few The main contenders for power in the election are now years was correctly pinned on the fascist RSS; and it divided into three groups: one is the Congress party of will be difficult for Ram to shake that association. Mrs. Gandhi; the second is the remains of the Janata Charan Singh, for his part, has sought to cover his party, led by long time Indian political leader Jagjivan own thoroughly reactionary small-peasant outlook with Ram, who was deputy prime minister in the post- 1977 a mantle of "progressivism," with the slogan of "anti­ government of Prime Minister Morarji Desai; and lastly communalism, anti-authoritarianism." The former re­ the grouping led by the current caretaker Prime Min­ fers to the Jan Sangh-RSS while the latter refers to ister Charan Singh, who pulled out of the Janata. Mrs. Gandhi. Charan Singh collapsed the Desai government in Au­ The Singh government at present consists of his gust and has since reformed his base into the Lok Dal own mish-mash Lok Dal, the anti-Gandhi Congress party, which also has the support of the anti-Gandhi now led by Karnataka Chief Minister Davraj Urs wing of the Congress party known as the Congress (U). (hence Congress "U"), and the remains of the Willy The only remaining major force in India is the Brandt-allied Social Democrats led by George Fer­ Communists, the pro-Soviet Communist Party of India nandes. (CPI) and the Maoist-leaning Communist Party-Marx­ Singh's own history and his declared election pro­ ist (CPM), who de facto support the Charan Singh­ gram makes him the fo remost proponent of the World Congress (U) combination. Bank's program for India-a rejection of industry-led Who then are these fo rces, what do they represent modernization in favor of "small is beautiful" ruralism in this election? The position of Mrs. Gandhi and her and austerity. In fa ct Singh, who had his name as the Congress is best explained in the accompanying inter­ author of a book which scorned Nehru's policies for the view with the editor of the leading Indian newsweekly industrialization and scientific development of India, Ne w Wa ve, Mr. Ganesh Shukla. now advocates that sections of India's vital public sector Both the Janata of Ram and Charan Singh's axis industry be auctioned off if they do not turn a profit. have made clear that they are running against Mrs. He has also proposed that strikes be banned, wages be

54 Asia EXECUTIVE INTelLIGENCE REVIEW Oct. 30-Nov. 5, 1979 ------) Exclusive Interview New Wa ve's Ganesh speaks about India Ganesh Shukla, editor of the Indian newsweekly, New Wave, granted this interview to the Executive Intelligence Review. Although Mr. Shukla toured the United States­ and now Europe-with an eyewitness report on the holo­ caust perpetrated in Kampuchea by the Chinese-puppet regime of Pol Pot, he fo cuses his attention here on the crossroads political situation in India. Q: With the downfa ll of the government of Moraji Desai suppressed-all to accomplish an austerity drive against and then his successor Charan Singh, India now laces the urban, industrial sector of the economy. national elections again, to be held in the end of December. The Singh program rejects the idea that continued How do you see the situation shaping up and what are the capital-intensive industry will bring development and issues of the campaign? calls for creating handicraft, "tiny industry" in the rural A: Now, after two and a half years of nongovernment areas, while trying to appease the rich farmers who by the Janata Party, the issue in India today that is fo rm Singh's personal base, particularly in northern being debated is whether India will have a stable India. It is not clear whether those farmers, who are national government or not. Right now, Mrs. (Indira) now benefiting from industrial inputs like tractors, Gandhi has become the focal point of the national fe rtilizer, and irrigation systems, would tolerate the election campaign because the broad masses of the implementation of such a policy for long. Indian people think that she alone is in a position to This World Bank perspective has in the past few provide a. stable and, development-oriented government days forced a new crisis for Singh-the forced resig­ that will be able to restore the traditional Indian polit­ nation of his Finance Minister H.M. Bahuguna, a ical system. respected progressive Congressman who broke with Mrs. Gandhi in 1977 to form the Congress for Democ­ Q: What do you mean by India's traditional political racy (CFD) and then joined the Janata. Bahuguna system? refused to join Singh's Lok Dal party, preferring to re­ A: This means that India returns to the policy of establish the CFD as an independent unit in the elec­ economic development, in a planned manner, returns tions, with the possibility of an arrangement in certain to a policy of justice to the weaker sections of the areas, particularly the crucial northern region, with populations, restores India's fo reign policy of independ­ Mrs. Gandhi's Congress. ence, peace, and nonalignment, and takes its rightful The departure of Bahuguna will result in a crisis fo r role in the world again. This embodies the basic na­ the left, who are now supporting a Singh without even tionally accepted political system of India since Inde­ the fig-leaf of a progressive cover. For the CPI in pendence, as it was defined by Jawaharlal Nehru. particular, which has traditionally aligned itself with the nationalist leadership of the Congress, this is a Q : How do you see Mrs. Gandhi's prospects fo r winning? difficult dilemma. A: The climate is very favorable for Mrs. Gandhi.

Q: That's quite a change since her defeat in 1977. What Decision for the Electorate has happened since then? Over the next two months or so the battle will be waged A: In 1977, Mrs. Gandhi was defeated not because of before the Indian masses, an amazingly politicized the emergency period that she imposed on the country, populace despite its mass illiteracy. The proverbial but due to the failure of the government to understand "largest democracy in the world" will exercise its man­ the World Bank game and to reject the policy frame­ date-despite persistent rUmors likely coming from work that the World Bank put fo rward for India. This Singh's people of a "postponement" of elections-in a failure was reflected in the government's -giving second vote which is sure to have great strategic impact on the place to development strategy and giving first place to international situation. population control. The World Bank recipe was that

Od. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Asia 55 family planning is the greatest development input into in Delhi was claiming that Mrs. Gandhi had ceased to the Third World. Many operations of a political nature be a figure of consequence. were thus able to be run against the government in the In that process they went too far, and now they are year before the elections because of this weakness. Mrs. finding it very difficult to retrace their steps. But the Gandhi became alienated from a large section of the rank and file and the middle level leadership of the population, and in the implementation of program Congress Party have rallied behind Mrs. Gandhi. What quite a few excesses were committed which were taken is now known as the Congress-U is really an organi­ advantage of by Mrs. Gandhi's detractors. zation of leaders, but without cadre and without mass But, during the last two and a half years, people fo llowing. So when people think of the Congress Party, have experienced in their own lives that those who were they think of the Congress that Mrs. Gandhi is leading. against Mrs. Gandhi in 1977 were not their friends, but their enemies. The Janata government's failure to main­ Q: How do the left parties fi t into the national election tain law and order, to provide physical protection for process-I'm speaking of the Communist Pa rty of India the weaker, exploited sections of the rural poor, its and the Communist Party Marxist? incitement of communal insurrections, and abnormal A: For decades, the one issue that has been dividing the price rises-these things hurt the people all over the Communist Party in India was the party's attitudes country. Moreover, the Janata government have an toward the Congress Party and toward Nehru in partic­ entry for tendencies to once again appear in the country ular. In 1964, on this issue, the Communist Party was which are threatening the unity of the people and the split-one party constituting itself as the Communist territorial integrity of the country. Party-Marxist. As far as the CPoM's policy is con­ Naturally, people feel that Mrs. Gandhi, who carries cerned, it is totally opposed to the Congress. It believed the heritage of the Indian feedom movement, is the and still believes that it stands to gain from social and only available national political leader who can govern economic chaos. in this process. The position of the CPI is different, both in its programmatic outlook and in its tactics. The CPI and Q: With the fa ll of Moraji Desai, it would seem that the the Indian National Congress Party, led by Mrs. Gan­ Janata coalition party has really fa llen apart. Can you dhi, have been working together in the legislature and explain what the Janata party actually was and why it in Parliament and in various mass forms. The CPI didn 't work? rightly supported the proclamation of a state of emer­ A: The Janata was essentially a conglomerate of half a gency by Mrs. Gandhi. It had a correct understanding dozen political parties and factions with nothing in of the danger to which the country was then exposed in common except their hatred of Mrs. Gandhi. It repre­ 1974 and 1975. However, in the post-election period sented an alliance of the trading community, led by Jan after March 1977, a section of the CPI felt the same Sangh, and rich fa rmers of a certain caste, whose way as some of the leaders of the Congress Party, who spokesman was Charan Singh. This was always a very are now Mrs. Gandhi's determined opponents. Because tenuous alliance. When the Janata came to power, the of the CPI's failure in March 1977 to win a sufficient farmers were the greatest losers-because of a certain number of parliamentary seats, a sectarian tendency fall in food prices and a concurrent rise in prices of has emerged which in practice reflects the same kind of manufactured goods, including fe rtilizer and the daily attitude as the CpoM. Therefore, the CPI is today necessities of the fa rmer. That is the real reason fo r the running after the slogans of "left and democratic unity' split between Charan Singh and Desai, in addition to with the CPoM, on the one hand, and the Charan their own hunger fo r power. But the way the internal Singh-type ruralists on the other. This deviation has left party struggle was carried out has created only disgust some sections of the party to make ideological conces­ among the broad masses of people. sions to the CPoM, and that will be quite damaging to India's democratic movement. Q: Th e Congress Party, the party identified with the fight fo r independence and the tradition of Nehru, has also split into the Congress-I party of Mrs. Gandhi and the Con­ Q: Given this panorama of the Indian political process, gress- V How does this split in the nation's most important how exactly do you assess Mrs. Gandhi's strength going political party effe ct the election process? into the national elections? A: After March 1977, many people in the Congress A: Her strength lies in her appeal to the poorest of the Party felt that Mrs. Gandhi was no longer a vote-getter poor who constitute nearly 20 percent of the popula­ for them, partly out of fear of the new government and tion-the harijan, untouchable caste, and in her appeal partly because of opportunism they thought they would to the adivasi, the tribalists, and the religious minorities gain by denouncing and ostracizing Mrs. Gandhi. They of Muslims and Christians. Then she has the support of were also highly influenced by the mass media, which the farmers, both the poor and the middle-level fa rmers,

56 Asia EXECUTIVE INTelLIGENCE REVIEW Oct. 30-Nov. 5, 1979 and has the support of a quite a good section of the urban middle class. By the urban middle class, I mean white-collar employees, engineers, teachers, scientists, and these ' comprise a very powerful section of the population in For stability, unity fo rmulating policies and programs for India. They have come around to Mrs. Gandhi. and progress' in India A good section of the industrial working class and trading class are not reconciled to her. There are certain Fo llowing is the text of a statement on the political castes, which have had a good share in the power in the situation adopted by the All India Congress Committee states in the past two years, who are also hostile to her. (AICC-I) on Thursday, Sept. 14. Th is text originally But whichever angle you look at it fr om, Mrs. Gandhi appeared in the progressive Indian newspaper Ne w Wa ve. is the accepted national leader in India. With the dissolution of the Lok Sabha a tragic chapter, Q: What will a victory fo r Mrs. Gandhi mean fo r India? dismal and dark in the history of the country comes to A: It will mean a restoration of the traditionally ac­ an end. cepted national policies in both the internal and external The national scene left behind by the J anata Party spheres. It means a return to a development orientation, is one of desolation, distress, disgrace and disintegra­ and the relaunching of a political fight for the New tion. The economy today is in a shambles. Galloping International Economic Order as the crucial issue of inflation, spiralling up with irresistible momentum, has the Nonaligned Movement. Mrs. Gandhi was one of overtaken the country. Working class cost of living the initiators of the New International Economic Order, index has shot up to 354, the highest ever. Money and she knows what it means. supply has reached an appalling figure of 33 thousand Her victory also means a decisive rebuffto Anglo­ crores, the highest ever. Industrial growth, on the American imperialism on the Indian subcontinent. She negative side, has reached the nadir, the lowest ever. is in sympathy with the fight of the Vietnamese and Unemployment figures have soared to the highest levels wherever she speaks, she tells the Indian people of the ever. Essential commodities are in short supply so that holocaust in Kampuchea. But her victory will be a blow the country has become a paradise for hoarders, black to the entire policy being pursued by the Anglo-Amer­ marketeers and smugglers. The self-sufficient structure ican circles. By this I mean the murder of Mujib of our economy, so carefully built up over the years, Rahman (head of state of Bangladesh). the murder of has been left badly fractured. The damage done to our Bhutto, and the destabilization of Indochina. Her vic­ economy has reached the point of irredeemability. tory will begin the reversal of this policy, because if On the social front the nation is in deep crisis. India starts acting as it should, it gives the needed Divisive fo rces and sectional passions have taken the strength to the fight for development in Southeast Asia upper hand. The minorities, the weaker sections, the and Asia. That is why many nations in Asia are looking Harijans and the Adivasis are living in acute distress toward the elections in India. and under growing sense of insecurity. The standard of public conduct and political morality has never been so Q: And lastly, Mr. Shukla, what will be the role of your low. The atmosphere is thick with vile and vicious newspaper, Ne w Wa ve, in this pT ocess? charges traded against one another by Cabinet Minis­ A: Since we came into existence in 1971, we have been ters and quietly withdrawn on convenient reconciliation, fighting the International Monetary Fund's design to with the result that the system itself is facing a crisis of stop India's development, to destroy India's sovereignty. confidence. The breakdown of law and order has be­ We are working for a broad alliance of prodevelopment come a regular feature of life. Security to life and forces in India to facilitate the industrial development property no more seems to be an obligation of the of the country and all around the world. And irrespec­ Government. Added to this, regional conflicts are as­ tive of who the power may be, we have been and we suming menacing dimensions. continue to point out, in a real progressive sense, the programs and policies that serve our nation best. Policy reversal We know that winning the elections is not an end in On the international front the nation has lost its leading itself, but just a means. If Mrs. Gandhi wins, as we position of respectability and moral authority. Even in hope she will, she will have to create a new consensus the non-aligned movement of which India was one of in the country as Nehru had created during the fight the fo unding fathers, the country has come to play the for independence, that takes this nation forward. She is role of a back bencher. The reversal of the policy of the very much conscious of it, and in this process, Ne w nonalignment with the spurious phrase of "genuine Wa ve has a very significant role to play. nonalignment" has cost the country dearly. Despised by

Od. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Asia 57 the advanced nations and disowned bv the Third World. tensions, personality conflicts and power struggle. Re­ India is today, like a rudderless boat, without direction alizing that the ship of the Janata party was sinking, in the rough waters of international affairs and is fast persons and groups of persons started jumping out. becoming a target for threats and menacing postures From the hypocritical scene of massive oath-taking at from neighboring areas. Rumblings are already audible Rajghat in 1977 to the present spectacle of the two fr om the northeastern and from the northwestern cor­ halves of the Janata Party flinging abuses against one ners. The security of the nation is today under threat. another, the nation has witnessed a picture of dismal . To be or not to be, that is the question before the nation national betrayal. in every aspect of its life. Clinging to the chairs of office, although rejected Archaic and obscurantist elements who took over by the Parliament and by the people, the Janata (S) the administration had during the two-and-a-half years pretends to be free of responsibility for the mess that of misrule mounted an onslaught on Jawaharlal Nehru the country is in. The Janata (S) cannot escape respon­ and all that he stood for. They ridiculed, scuttled and sibility for all the sufferings that the people are undergo­ abandoned the 20-point program which had come to ing. Now that they are sticking on in their respective the common man as a boon and as a forward leap. The chairs without any conceivable moral sanction their momentum of progress was halted and the nation was answerability is all the more manifold. The Janata (S) put in the reverse gear. The result is the appalling scene Government is, in effect, standing guard for the anti­ of desolation that the Janata Party has left behind. social elements and the economic offenders to manip­ While the nation was looking up to the Janata Party ulate products and market and to fleece the people. Government for the solution to the problems of poverty, misery, disease and squalor, the Janata Party Govern­ Instability ment wasted vindictive action against Smt. Indira Gan­ The Janata Party and the Janata (S) are both chips off dhi and thousands of other Congressmen. They resorted the old block. Carved out by a vertical split and to unlawful arrest, vindictive prosecutions, misuse of retaining their character as the conglomerate of dispar­ the machinery of Commission of Inquiry, meddling with ate constituents a repeat performance of undivided the judiciary and manipulation of publicity media. The Janata Party is all that can be expected from both. Both Janata Party Government misused its majority in Par­ of them carry the menacing promise of instability and liament to expel Smt. Indira Gandhi after she had anarchy in the same measure as did the original Janata secured a massive mandate from the electorate in Chik­ Party. Both of them carry the stamp of reaction, re­ magalur. All of these served only to alienate them from trogression, communalism and casteism, no less than the people. They sacrificed the nation at the altar of did the original Janata Party. Both the parties jointly personal vengeance against Smt. Gandhi. and severally are the worst reaction entrenched in Indian politics. They stand fo ur square against the path Vision of progress and development that Pt. Nehru delineated In contrast, the story of the nation, under the steward­ for the nation and they both seek to take the nation ship of the Congress, after independence was one of backwards and away from that path. sustained growth, development and consolidation. Ma­ Loud noises are being made by a few persons and hatma Gandhi as the leader of the Congress movement groups claiming themselves to be leftists. Their clatter had given to the Congress and to the nation the vision about authoritarianism is an exercise to hide their own of the India to be. Jawaharlal Nehru truthfully and totalitarian character and their gang up with reaction­ faithfully interpreted the vision of the Father of the ary fo rces. It had been their misfortune to operate in Nation and had, during his period of stewardship, isolation, isolated from the national mainstream and enabled the people to evolve the concept of the India of aligned with reactionary forces. They could never accept their dreams. Mrs. Indira Gandhi during the decade of the democratic socialist movement of India which the her stewardship had taken the country further forward Congress alone has been representing. on the path of democracy, socialism, and securalism The AICC affirms that, spearheading as it does the which the Nehru line of thinking had initiated for the democratic socialist movement of the country, the Con­ nation. gress and the Congress alone represents the national The disintegration of the Janata Party was inevita­ leftist mainstream in tune with the genius of India. All ble. The seed of disintegration was planted in the party else, talking the language of ultraleftism is. puerile on the very day of its formation. As repeatedly pointed adventurism. So far they have been hand in glove with out by the Congress, it was a conglomerate of disparate the Janata (S) which, for all to see, is the symbol of the constituents covering a wide spectrum from Socialists crudest type of casteism, anti-Nehruism, kulakism and to Swatantrites and from the statusquoists to anarchists. reaction. That the democratic socialist movement will Unable therefore to pursue any positive policy it was have to contend with the combination of the forces of bound to drift aimlessly. This resulted in inner party the right reaction and the left adventurism was a

58 Asia EXECUTIVE INTElLIGENCE REVIEW Od. 30-Nov. 5, 1979 warning given long years back by the Congress and Pt. resumption after the unhappy interruption by the Janata Jawaharlal Nehru. The warning is again proving true interludes. at a crucial movement of the history of our country. It has become an imperative duty of the Congress to restore India's prestige in the international world by Rump reviving and strengthening the non-aligned movement, In the backyard of the parties and groups that count establish a stable, sound, secular and democratic ad­ more or less, fe eble noises are made by a group in the ministration in the country, restore the confidence of name 'of the Indian National Congress. Deserted by the the Harijans and Adivasis, the minorities and the back­ millions of Congressmen, that group is left with nothing ward classes, in the future of the nation, rejuvenate the that is akin to the Congress. That this small rump economy with appropriate policies so that economic should call itself the Indian National Congress is an growth and stability may ensure the elimination of insult to the majesty and to the might of the Congress poverty and the establishment of an egalitarian society movement. Now that it has adopted the leadership, the and may provide all around progress in the development election symbol and the manifesto of the Janata (S) the of science, technology, art and culture. last of what little of Congress semblance it had, has Summoned to the polls, the nation is approachinr been abandoned. Its political significance on the Indian a moment of destiny where the electoral verdict of the scene has become too irrelevant to deserve attention at people will be decisive for the future of the country and the hands of the AICC. for long years to come. The task before the nation is stupendous. A clearsighted, strong and able adminis­ Undignified attack trative leadership, committed to the cause of democratic Afraid of going to the people, the Janata Party has socialism, secularism and self-sufficiency and having launched an undignified attack on the President for the determination to defend the weak and the lowly is calling the general elections. By launching a crude and imperative to lift the country from the morass into vicious attack on the President, the Janata Party has which the Janata Party has plunged it. A halting attempted to strike at the center of the Constitution. electoral verdict endangering stability at the center will The motivation behind this attack is their guilty con­ endanger democracy itself. science and their fear to go to the people. The AICC The AICC calls upon the millions of Congress welcomes the decision of the President to order the workers and the larger number of its sympathizers to general elections. To refuse the election would have fan out to every nook and corner and to explain to the been to reject the demand by all the parties in the Lok people the vital issues involved in the forthcoming Sabha. Nothing could have been more undemocratic elections. The AICC appeals to the people to rise to the and more against the people. occasion and, taking into account the basic issues The Congress considers its political task as not one involved, give an electoral verdict giving to the Con­ of mere operation but as a continued revolutionary gress a mandate in no uncertain terms, to resume the endeavor for the transformation of the society. The task of taking the country forward on the path laid out fundamental process a long way through, calls for by Pt. Jawaharlal Nehru.

Oct. 30-Nov. 5, 1979 EXECUTIVE INTELLIGENCE REVIEW Asia 59 Congressional Calendar

that aid to Chrysler be coupled with such as John LaFalce (N.Y.) and H earings set on Volcker credit a "Big Mac" takeover of the cor­ Mary Rose Oakar (Oh.) questioned crunch poration's management by outside Chrysler closely on why the com­ Congressman Parren Mitchell (D­ interests. pany should not put itself through Md.) has announced that hearings The administration, led by the a Chapter 11 bankruptcy. This was will be held on the "fiscal austerity" Treasury Department, apparently a surprise to many observers, who policy of Federal Reserve chairman has no intention of granting Chrys­ had expected a more positive re­ Paul Vo lcker Nov. 13-15. The Fed ler's aid request unless Chrysler sponse to the plight of the tenth chairman will testify Nov. 13. submits itself to the kind of outside largest corporation in the country. Mitchell has set the hearings for accounting entity established in the On Oct. 23, Detroit mayor a month from now to give time for British Leyland case and in the case Coleman Young testified before the the fu ll effect ofVolcker's policies to of federal aid to the city of New subcommittee and declared in no become apparent. York. UAW president Douglas uncertain terms that a bankruptcy Mitchell says that he himself Fraser's request that Chrysler would be a national disaster. Speak­ would propose "a reduced money workers be represented in Chrysler ing for himself and the U.S. Confer­ supply," but according to aides on decision making indicates that ence of Mayors, Young said, "If the congressional Black Caucus Fraser would probably go along Chrysler were to fail, numerous cit­ staff, he also has other things in with the scheme. ies in a number of states would face mind. Spurred by the threat of in­ The final administration deci­ economic crises which range from creased unemployment, especially sion is likely to strongly determine bad to catastrophic ....This country in the nation' cities, Mitchell and the ultimate subcommittee and has never faced the failure of an Rep. Hawkins (D-Calif.)plan to use committee decision on the matter. enterprise employing over 140,000 the debate around the Fed's policies So far, very few congressmen have people. . . .In Delaware, the area to build support for government­ placed themselves firmly on either would lose 14,000job s and have its financed jobs programs. As Mitch­ side of the issue, with the exception unemployment doubled. In St. ell sees it, Vo lcker has provided the of Rep. James Blanchard (D-ML), Louis, more than 25,000job s could opportunity to finally push the sub­ who has introduced draft legisla­ he lost . metropolitan Syracuse stance of the Humphrey-Hawkins tion modeled essentially on Chrys­ would have its unemployment rate make-work bill through Congress. ler's request. Subcommittee chair­ doubled, as would Huntsville, Ala­ man William Moorehead (D-Pa.). bama. In Kokomo, Indiana, 40 per­ at the first hearing on Oct. 18, stat­ cent of all jobs would be affected by ed that he wanted to either give the direct and secondary effects of Chrysler no money at all, or give it a Chrysler shutdown." Yo ung then A "Big Mac" for Chrysler? sufficent money to prevent bank­ went on to detail the tax losses to While the House Economic Stabi­ ruptcy. "I don't want to get into a various cities from a Chrysler shut­ lization Subcommittee of the Bank­ situation where we give you so down. ing and Currench Committee has many hundreds of millions of dol­ Even after his testimony, Capi­ held hearings "exploring" the mer­ lars, and you still go bankrupt be­ tol Hill sources report that the its and necessity for Chrysler's fed­ cause it wasn't enough." mood of the subcommittee is hard eral aid request, Capitol Hill Moorehead and ranking Re­ to call. They stress that ·most will sources report that the real issue pUblican Stewart McKinney are re­ follow the Carter administFation's has yet to be put on the table: the portedly . leaning toward granting lead. A proposal from there is due Treasury Department's demand some kind of aid. Other Democrats the first week in November. suits. "We will amend it immediate­ corporate political action commit­ Kennedy's Illinois Brick Bill ly so there will not be a lot of Na­ tees, known as PACS. The legisla­ Despite the threat of a filibuster derite suits," said one staffer. How­ tion reduces the amount a single fr om Senators Hatch (R-U.) and ever, businesses and state govern­ PAC can give to one candidate Thurmond (R-S.C.) and the strong ment would then still be permitted from $10,000 to$6,000. opposition of business, Senator Ed­ to sue down the line of users. The legislation is currently ward Kennedy seems determined to Kennedy has his political being reviewed in Senate confer­ ask Senate Majority Leader Robert leadership in the Senate on line with ence, where it is subject to approval . Byrd (D-Va.) to bring the Illinois the Illinois Brick bill. It is the first as a "courtesy" to the House, if the Brick bill to the Senate flooras fast bill he has managed as chairman of Senate Administration and Rules as possible and absolutely by no the Senate Judiciary Committee. Committee so decides. Common later than January. Sen. Byrd has refused to allow the Cause spokesmen believe the Sen­ The legislation would permit bill to come to the floor unless he ate will let the legislation stand. consumers to sue and collect treble knows there will be 60 votes to close Common Cause has consulted damages from a corporation that off the expected filibuster. Further­ closely with Rep. Obey (D-Wisc.l. had been convicted of price-fixing more, even such staunch Kennedy It was the Common Cause suit and other antitrust violations, even friends as Sen. George McGovern against CREEP (Nixon's reelection if they do not buy directly from the (V-S.D.) have refused to endorse committee) that got the Fe deral company. As it stands now, the bill the bill. In McGovern's home state Election Commission established. would invite numberous class ac­ of South Dakota, advertisements Common Cause Capitol Hill lob­ tion suits against corporations by are appearing placed by food byist and legal adviser, Fred Werth­ consumer groups. chains opposing a suit by cattlemen eimer has made clear that the Obey The current antitrust suit that charges that the supermarkets bill is the fi rst step in extending the against IBM shows the impact the fixed low prices for the meat they commission's power over Congress: bill could have. If IBM loses the 10- buy from meatpackers, who buy "This is a fo ot in the door for public year-old case the Justice Depart­ from the cattlemen. This suit would financing; in this session, there is ment is prosecuting against it, IBM l?e permitted to proceed under the much opposition to public financ­ will be potentially liable to pay tre­ Illinois Brick bill. ing legislation ...too much opposi­ ble damages to every individual tion to having the money taken out who received services from compa­ of congressional eelections. First nies relying on IBM services. we get the Obey passed, the legiti­ This week, Kennedy met with A Congressional FEC? macy of the concept of limiting out­ Sen. Morgan (D-N.C.) and Sen. This week the House passed by a side campaign spending of special Danforth (D-Mo.) to discuss strat­ vote of217-198 the Obey-Railsbach interests, and then we will be able egy to get the Illinois Brick bill bill, ending a victorious phase one to limit it altogether, either by hav­ through. According to their aides, for the attempts of Sen. Edward ing the FEC or the national parties the three intend to offer many com­ Kennedy and Common Cause to themselves running the financing promises to see it pass. On the day extend the powers of the Federal of the congressional candiates." the bill is introduced, said one aide, Election Commission. How do they propose to pass there will be an immediate amend­ The bill will approve amend­ public financing? Wertheimer stat­ ment introduced by Danforth an� ments to the Election Code prohib­ ed: "Kennedy is the principal spon­ Morgan taking out those parts of iting candidates for the House from sor in the Senate of our ideas ..." the bill allowing for class action accepting more than $70,000 from Kennedy for President, anyone? fA CTS BEHIND TERRORIS Law enforcement officials as­ sociated with the Humboldt County Sherriff's Office have con­ firmed that members of the com­ mune are not only members ofthe SLA, but of the Black Liberation Army and t he Weatherunder­ ground. As late as Nov. 19, Weatherun­ Justice Department opens door to terror derground members were arrested fo r actively conspiring to bomb Attorney General Benjamin Civi­ units in New York City and else­ the offices of California State Sen­ letti's recent release offour Puerto where had joined with proterrorist ator John Briggs. The four arrest­ Rican terrorists convicted of at­ elements of the environmentalist ed included Judith Emily Bissell tempting to murder President Tru­ camp to help coordinate logistics and a woman using the alias m an, combined with the an­ and train personnel for an assault Grace Fortner. Both are members nouncement on Oct. 20 that the on the complex. of the Revolutionary Committee re,maining members of the Weath­ The Oct. 20 decision by the of the Weatherunderground. A er underground terrorist organi­ government to quietly terminate third, Clayton Van Lydegraf, has zation have had fe deral charges its investigation of the Weather­ been identified by law enforce­ against them dropped add up to a underground included a dropping ment agencies as the ringleader of green light for a full-scale terrorist of all charges against individual the Prairie Fire Organizing Com­ activation in the United States. terrorists of the organization. The mittee (a Weatherunderground Two major terrorist incidents implications of this decision be­ support apparatus) in San Fran­ have already been carried out by come clear in light of a recent cisco. All three plus the fourth, the Puerto Rican terrorist organi­ terrorist activation in Seattle, Thomas Michael Justensen, were zation, the FA LN, and the Man­ Washington. members of the terrorist Seattle son-Symbionese Liberation Army On Oct. 14. the reorganized Liberation Front, wanted fo r cult. Mansun-':)LA- cult attempted a bombings and conspiracy to riot. As a result of Civiletti's ac­ jailbreak from the Kings County On Oct. 7, one week before the tions, coupled with the Ford Ad­ jail. One policeman was killed in Seattle jailbreak attempt the Long ministration's Levi guidelines the attempt. The leader on the Beach Independent Press Tele­ which have crippled intelligence inside was Artie Baker who was gram (California) quoted an intel" and law enforcement authorities, awaiting sentence for the murder ligence agent as saying that mem­ the growth of terrorist organiza­ of a U.S. northern Border Patrol bers of the Manson family cult tions and their support groups agent. Baker was groomed as a and the SLA have joined forces, will go unabated. terrorist at a commune near Ho­ and that the group "is planning Upon their release earlier this neydew. Calif.. called the Well something that will make the Pat­ month the fo ur Puerto Rican na­ Spring Comm union. The 240-acre ty Hearst thing look penny ante." tionalists went on tour, addressing ranch, a guerrilla warfare. terror­ Reportedly, nearly $2 million has rallies ufthe FA LN (Armed Forces ist training "safe house" is guard­ been raised through crime to help of National Liberation), last ed day and night by armed l11en Manson, his followers and SLA week, the FA LN bombed two Chi­ wearing ammunition belts. members escape from prison. cago city government buildings. One of the co-owners of the With this wealth of public Reportedly there was an FA LN ranch was a personal acquain­ knowledge, the failure of the De­ threat to bomb the Indian Point tance of Sara Jane Moore and was partment of Justice to act properly nuclear power facility in New four feet fr om Moore when she in preventing terrorist actions rep­ York. Such a turn toward environ­ attempted to assassinate Presi­ resents a clear-cut case of political mentalist terror should come as dent Ford. contamination or total stupidity no surprise to our readers. Shortly \\-orkmg trom the outside on on its part. The DOJ, through its before the attempted environmen­ the attempted breakout were two actions, has set up the nation for talist action at the Seabrook, N.H. other individuals who have been large-scale terrorist activity par­ nuclear power plant construction identified as convincted fe lons alleling that which has occurred site, it was learned that terrorist who worked for the SlA and this in Western Europe. sympathizers from FA lN support Communion network. -Robert Kay ASOR PERISCOP

cently implemented by Chairman of the Federal Reserve Board, Paul Vo lcker. His policy of raising in­ terest rates and reducing available credit, together with his call for the elimination of the cost of liv­ ing escalator clause, will destroy our economy and increase unem­ ployment. Vo lcker made his point Will labor go after the Fed? unmistakeably clear in testimony before the Joint Economic Com­ The shivers of terror that ran Admittedly, Lane Kirkland mittee where he stated, 'In order down the spines of trade union has been compelled to say some­ to stop inflation, the U.S. popula­ leaders last week, as the intent of thing. The man who is almost cer­ tion must accept a lower standard Paul Volcker's new "anti-infla­ tain to replace George Meany at of living'." tion" policy became clear, have the top of the AFL-CIO delivered Until now, most labor leaders given way this week to the begin­ a mild criticism of the Fed effort to have been content to leave overall nings of movement to put a stop provoke depression. Volcker's pol­ economic policy to the backrooms to the Federal Reserve Chairman's icy is the "controlled distintegra­ of Washington and New Yo rk­ plan for a new depression. Only a tion" policy of the New York and London, where Vo lcker's pol­ fe w labor leaders so fa r have de­ Council on Foreign Relations, of icy was devised-while staying nounced Volcker's interest-rate which Mr. Kirkland is a member. home and bickering with local hikes, but so have some bankers, Said Kirkland, Vo lcker's action is management over shop-level some politicians, and some indus­ "the wrong measure at the wrong agreements prbmptly rendered try spokesmen. One presidential time" and the administration meaningless by decisions taken in candidate, Democratic contender ought to adopt "specific meas­ Washington, New York and Lon­ Lyndon LaRouche, is calling for ures" to "shelter areas of great don. Powerful thieves and "feu­ the Fe deral Reserve chairman's social need from the chill wind of dal" lunatics who despise indus­ immediate impeachment. From tight and expensive money." (He trial growth are threatening to de­ the nature of the issue, however, added that the "economic ac­ stroy the economy, the labor labor ought to be up front. cord" between the AFL-CIO and movement, and the nation. They Indicative of what the Vo lcker the administration "might" be do not understand "criticism" of package will mean for the build­ jeopardized.) The problem is, their policy. We need measures ing trades, fo r example, the Na­ Kirkland is not known for his that can defend the nation's cur­ tional Association of Homebuild­ ability to distinguish between the rency and banking institutions, ers launched its own drive against "social need" known as industrial while safeguarding our crippled Vo lcker this week with a full page production and employment, and steel industry, our threatened nu­ ad in the Washingtn Po�t. "There legalized gambling, urban slave­ clear energy and aerospace sec­ must be a better way to deal with labor and the like. tors, our construction industry, inflation than policies that will One labor leader, at least, has and others, from the assault of the deepen and prolong our national made a forceful statement. Ralph anti-American faction in the na­ ' recession, cut new home construc­ Greene, Secretary-Treasurer of tion's political life. Labor must tion in half, and throw 1.5 million Local 713, Federal Printers help mobilize a political move­ men and women out of work . ... Union, issued the following state­ ment of this country's population When will Washington policy ment several days ago fr om his to deliver a resounding defeat to makers learn that high interests Washington, D.C. headquarters: those, like Paul Vo lcker, who seek rates force-feed inflation, not "I am asking all concerned cit­ to destroy us. Then we can get on starve it. ..." izens, trade unionists, and elected with the urgent job of domestic But so far, not a peep from the representatives to join me in de­ and global recovery. building trades unions, who are manding that President Carter Labor needs more Ralph charged with · representing those and the U.S. Congress reverse the Greene's. 1.5 million women and men. disastrous monetary policy re- -Lydia Cherry C______W_ O_R_L_D__ T_R_ A_D_E_R_E_V_I_E_W______)

New trade deals

COST PRINCIPALS PROJECT /NATURE OF DEAL FINANCING STATUS

Up to $1 Lebanon from U.S. and Europe Middle East Airlines plans to buy up to 19 short-to­ Exact mix of bn. medium-range airliners. planes is under discussion

Above Japan/Mexico Mexico will export 100,000 bpd of oil and (on its Agreement will $900 mn. insistence) other products to Japan. Joint investments in be sig ned next per annum steel, heavy machinery, capital goods, port development, month, accord­ for oil in mass transport systems, maritime transport and tourism ing to Japan's first years are under discussion. Mexican oil exports to Japan will be ambassador to boosted to 300,000 bpd by 1983. Mexico

$400 mn. Canada from U.S. CP Air (Vancouver) places firm order for four Boeing 767 Boeing an­ jets, options on four more. nouncement

$214 mn. Iraq from Japan Mitsubishi will supply two turnkey LPG projects.

$22 mn. Qatar from U.K. Protek International will serve as consultant for gas Contract transmission project to service a new power station in awarded by Doha. Qatar govern­ ment

$10.9 mn. Iraq from Italy Ingeco Lang International will erect a loading facility at Salahuddin.

EEC/Comecon Sector-to-sector trade pact. Preliminary talks begin Nov. 26

$3.2 bn. Iran from Japan Mitsui petrochemical construction project has been re­ vived and will be completed.

"brevlatoon.: • StatuI: U = Undetermined I = signed, work in progress NAp. = Not applicable II signed, contracts issued

= NAv Not available III ..= deal .igned IV = in negotiation V ..preliminary talk. [THIS PAGE IS INTENTIONALLY BLANK] Gold October 19 393.00

London afternoon fixing 22 392.00

23 385.00

24 395.00

25 391 .80

300 ------�

------'...... 280 --:-:-- 9/7 9/ 14 9/2 1 9/28 10/5 10/12 10/19 10/26

1.90 The dollar October 18 1.7965 in deutschemarks 19 1.7995 1.85 ------++++H New York late afternoon 22 1.7995

23 1.8065

24 1.8026

The dollar in yen October 18 232.75

New York lateaf ternoon 19 230.50

22 233.80 210 23 235.10

200 24 234.00

190 9/7 9/ 14 9/2 1 9/28 10/5 10/12 10/19 10/26 1.70 The dollar October 18 1.6375 in Swiss francs 19 1.6465

New York late afternoon 22 1.6465

23 1.6610

1.60 24 1.6540

1.55 9/7

2.30 The British pound October 18 2.1515

in dollars 19 2.1545

New York late afternoon 22 2.1450

23 2.1 175 2.10 24 2.1 160 .05 9/7 9/ 14 9/2 1 9/28 10/5 10/12 10/19 10/26