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THE WESTERN THE MI DDLE EAST OLIGARCHY AND AFRICA

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INTELLIGENCE DIRECTORS: ince this is our last issue before the holidays, the editors of EIR Africa: Douglas DeGroot, Mary Lalevee S Agriculture: Marcia Merry would like to take this opportunity to thank those of our subscribers Linda de Hoyos Asia: whose large contributions, during have made it possible to put Counterintelligence: Jeffrey Steinberg, 1986, Paul Goldstein the weekly publication and many copies of our Special Reports, in Economics: David Goldman European Economics: William Engdahl, the hands of policy makers around the world. Laurent Murawiec Thanks to contributions in the range of $5,000 to $25,000 we Europe: Vivian Freyre Zoakos Ibero-America: Robyn Quijano, Dennis Small have been able to furnish scientists, doctors, and public health offi­ Law: Edward Spannaus cials in many African nations with copies of EIR's Special Report, Medicine: John Grauerholz, M.D. Middle East: Thierry Lalevee "An emergency war plan to fight AIDS and other pandemics," pub­ Soviet Union and Eastern Europe: lished in February at $250 per copy. We have received many letters Rachel Douglas, Konstantin George Special Projects: Mark Burdman of thanks from the recipients of these gifts, telling us that they United States: Kathleen Klenetsky consider the information in the Special Report and EIR vital to the INTERNATIONAL BUREAUS: survival of their populations. Bangkok: Pakdee and Sophie Tanapura Bogota: Javier Almario This is only one example. Other readers' contributions have Bonn: George Gregory, Rainer Apel gotten EIR into the offices of Congress-along with copies of the Chicago: Paul Greenberg Copenhagen: Poul Rasmussen Quarterly Economic Report, the only source of information on what Houston: Harley Schlanger has gone wrong with our economy and how to fix it. EIR's unique Lima: Sara Madueiio Los Angeles: Theodore Andromidas economic authority will have to become the manual of our lawmakers Mexico City: Josejina Menendez in the coming months (see pp. 68-69), as they belatedly recognize Milan: Marco Fanini New Delhi: Susan Maitra the disaster of the"post-industrial society," but lack the knowledge Paris: Christine Bierre to tum it around. Rio de Janeiro: Silvia Palacios Rome: Leonardo Servadio, Stejania Sacchi Last spring, such contributions put copies of EIR Special Reports Stockholm: William Jones like the explosive" Ariel Sharon and the Israeli Mafia," which con­ United Nations: Douglas DeGroot Washington, D.C.: Nicholas F. Benton tained the in-depth portrayal of the networks now being exposed in Wiesbaden: Philip Golub, Goran Haglund "Irangate," in the hands of key intelligence and Pentagon officials. EIRIExecutive Intelligence Review (ISSN 0273-6314) is Increasingly of late, we hear some of the words and even the published weekly (50 issues) except for the second week ofJuly and first week of January by New Solidarity conceptions that used to be read only in EIR, being echoed by certain International Press Service 1612 K St. N. W. . Suite 300, Washington, D.C. 20006 (202) 955-5930 Washington officials who are now in the process of cleaning out the Distributed by Caucus Distributors, Inc. mess that Henry Kissinger left behind. Several instances can be E_rtJfIHII HetJdquarters: Executive Intelligence Review Nachrichtenagentur GmbH, Postfach 2308, monitored in this week's Economics, International, and National Dotzheimerstrasse 166, 0-6200 Wiesbaden, Federal Republic of Germany reports. Tel: (06121) 8840. Executive Directors: Anno Hellenbroich, Michael Liebig Our contributors, by making certain that EIR's publications I" Denmar/c: EIR, Haderslevgade 26, 1671 Copenhagen (01) 31-09-08 reached the right places at the right times, have already helped us to I,. Mexico: EIR. Francisco Dias Covarrubias 54 A·j change the course of history. In the coming weeks, we hope that Colonia San Rafael, Mexico OF. Tel: 705-1295. JDfHl.n subscriptioll sales: O.T.O. Research Corporation, many more of you will join that exciting process. Takeuchi Bldg., 1-34-12 Takatanobaba, Shinjuku-Ku, Tokyo 160. Tel: (03) 208-7821. Copyright © 1986 New Solidarity International Press Service. All rights reserved. Reproduction in whole or in pan without permission strictly prohibited. Second-class postage paid at Washington D.C., and at an addlllonal ma,hng offices. 3 months-$125, 6 months-$225, 1 year-$396, Single issue---,$IO Academic library rate: $245 per year Postmaster: Send all address changes to EIR, P.O. Box 17390, Washington, D.C. 20041-0390. (202) 955-5930 •

IIillConteDts

4. Departments Science & Thchnology Economics

21 Report from Rio 28 Aerospace production 4 The ·economic agenda for Brazil 'integrates' Argentina. capability: a shadow of the 1988 surfaces 1960s 51 Vatican Even the aerospace and defense 6 Thatcher leads European Economic justice theme of Asia industries have not fared well prime ministers in 'war on trip. during the "economic recovery." A AIDS' report by Marsha Freeman and 52 Report from Bonn Robert Gallagher. 8 Soviet economy: NEP, An adviser who came in from the environmentalism, and East. military industry: a contradiction? 53 Report from Paris Student demos used against 10 Indo-Soviet trade: rubles Chirac. and rupees

54 Andean Report Investigation 11 Currency Rates AIDS conferences held in Lima. 60 Fidel Castro's friend 12 Behind the 'stagnant Vesco aids the Contras 55 Mother Russia recovery,' a deep The financial empire of one of the economic recession The KGB and the Dzerzhinsky Sandinistas' top financiers and method. threatens benefactors, narcotics finance king A survey of the West German Robert Vesco, sits at the center of economy. 56 Middle East Report Contra operations. Confusing? Not Will Moscow really gain in if you understand the workings of 19 U.S. Lines' parent Irangate? Dope, Inc. company files Ch. 11 57 Dateline Mexico 63 AIDS outbreak in 20 Argentine Church backs Mexican 'Big MAC' suggested to Nicaragua, Contras Japan. labor's demand

72 Editorial 22 Domestic Credit 'Consensus forecast' on the Time to dump AIFLD. Titanic.

23 Agriculture Food disputes in a world of hunger.

24 Medicine New technology for cancer detection.

2S Banking The first cracks in securitization.

26 Business Briefs I. I

Volume 13 Number 50. December 19. 1986

Feature International National

44 Shultz a disgrace at NATO 64 'Irangate' sparks policy foreign ministers' meeting shifts, NSC clean-up The communique issued after the The purging of the Kissinger and NATO foreign ministers' meeting Mossad-contaminated elements is was contrary to the policy of both only the surface of an expected the U.S. government and NATO. deeper change, in both the The allied governments find structure and substantive policy themselves in the dangerous orientation of the Reagan position of having a foreign administration. Swedish Prime Minister Olof Palme speaking in ministers' revolt on their hands. Washington in 1982. This week's feature looksat why Documentation: the Soviets decided to kill him. Recent 66 LaRouche Democrat sets statements by Defense Secretary mayoral program 34 Why did Moscow Caspar Weinberger, NATO Mrs. Sheila Jones, a leading assassinate Sweden's Supreme Commander Gen. LaRouche collaborator in the Bernard Rogers, and U.S. Premier Olof Palme? Midwest, has accepted a mandate Ambassador to West Germany from the "forgotten majority" to Sensational revelations in the Richard Burt. European press about Palme' s love run for mayor of Chicago in the affair with Emma Rothschild primary in February 1987. Busting up Kissinger's provide the key to unraveling the 48 mystery. Little wonder, then, that special U.S.-Israel 68 Economic, military crisis NBC-TV and the U.S. Justice relationship scares Dems Department have launched a new One of the main targets for clean­ The Democratic Leadership disinformation attempt, reviving up in the Irangate scandal is the Council. meeting in Williamsburg, the discredited line of a National Security Council's Israel grappled with the fact that the "LaRouche angle" in the murder. connection. country is undergoing one of the Our Feature presents the findings greatest economic and military of a team of researchers in Europe 50 Kissinger Watch crises in its history. Some of the and the United States. are Scandal shuttle on the northern results quite surprising. route. 36 Bizarre twists in the Palme 70 National News investigation 58 International Intelligence

38 The Rothschild factor and the role of SIPRI Correction: As most readers no doubt determined for themselves, 39 A classic Soviet in the article "EIR' s record: how disinformation job we called the shots," in last week's issue (page 38), the first date should have read, Jan. 8-14, 41 A worldwide media 'big 1980, not 1986. lie' campaign

42 Police furious at Holmer's cover-up

43 Moscow's favorite Swedish bankers

, �TIillEconomics

The economic agenda for 1988 surfaces

by David Goldman

It might be that the myth of the "Reagan recovery" will low-wage retail trade and service sectors, have led to the disappear, forgotten and unmourned, along with its principal popular perception that America may be on the verge of architect, White House Chief of Staff Donald Regan. The losing its middle class. " same concernfor national security that prompted the ongoing Since 1981, construction and manufacturing jobs dropped purge of Regan and related elements in the White House and by 500,000, while private sector service employment ac­ the departments of government, has emerged in a new, wide­ counted for all the net growth: of civilian jobs. Since 1979, spread recognitionthat the United States has entered a period nearly 97% of the net employment gains for white males of economic disaster, and that nothing short of a supreme were in the low-wage category, that is, below $7,000 a year national effort will save the nation. measured in 1984 dollars. Appropriately, the battle inside General Motors has be­ A study by EIR, to be published in our end-of-year Quar­ come symbolic of the reaction against the petty-accounting terly Economic Report, show!> that the expansion of low­ attitude of the White House and U.S. corporate leaders, which wage jobs, and contraction of: manufacturing employment, has viewed capital-intensive manufacturing as "cost-ineffec­ has led to a situation where 32% of all working-age Ameri­ tive. " General Motors officiallyinaugurated the next ratchet­ cans and their families fit the profile for recipients of occa­ collapse in manufacturing two days after the Republicans' sional food-basket donations, ,as noted by private charities defeat in the November elections, announcing the largest across the nation. The predicament of working Americans number of permanent layoffs ever planned by aU. S. corpo­ echoes President Franklin D. Roosevelt's second-term inau­ ration. With GM's car and truck production down 16% rela­ gural warning that "one-third of a nation" had become desti­ tive to last year's, and the overall U.S. auto industry's output tute. down 8%, GM's scramble to cut productionand inventories, No one but the country-club set (minus real estate oper­ clumsily timed to maintain the fiction of economic health ators , savings bankers, oil men, and so forth) imagined that through election day, destroyed the last shreds of credibility the recovery ever was, which explains the Republicans' elec­ of the recovery myth. toral disaster in November. In fact, as the Joint Economic Committee of Congress showed in a report issued Dec. 10, the appearance of recovery Enter: H. Ross Perot might have persuaded Reagan boosters principally concerned That is the background to H. Ross Perot's celebrated blast with their stock portfolios, but not the public at large . The against General Motors management. JEC showed that total employment grew by more than 8 Perot warned in a speech at the Detroit Economic Club million between 1979 and 1984, but that all of the net growth on Dec. 8, that America's industrial base has moved "off­ occurred in jobs paying less than $14,000 a year, and nearly shore." The market share of U.S. manufacturers is eroding, 60% of the net growth took place in jobs that paid less than Perot said, because the U.S. economy is becoming too ser­ $7,000 a year. vice-oriented. The United States must maintain a strong man­ Barry Bluestone of the University of Massachusetts and ufacturing base . You can't have an economy depending on Bennett Harrison of Massachusetts Institute of Technology the service sector, he said. drew the obvious conclusion: "The continued decline in high Perot's speech was attended by a record 7,000 people, wage manufacturing, combined with the expansion in the largely because of his recent highly publicized criticism of

4 Economics EIR December 19, 1986 the management of General Motors, the world's largest in­ "In this changing world, we will need people who can be dustrial corporation, which just paid Perot $700 million to quickly adapted to working in manufacturing, research, and buy out his share of the company. automated offices or service institutions," he said, predicting Interviewed for ABC-TV's "Business World," program that workers may have to be retrained fiveor six times during on Dec. 7, Perot explained, "I just don't want to be part of their careers, because technology will change the jobs. an organization that's closing plants, laying people off. I Perhaps by no coincidence, Inman recently took a seat on want to be part of an organization that's growing, dynamic, the regional board of the Dallas Federal Reserve Bank. creating jobs. "If you go to war, you feed the troops before you feed the The oil price issue officers, " he said. "You can't look the troops in the eye and For the first time, there appears to be serious political say, 'It's been a bad year; we can't do anything for you,' but pressure building in favor of a cure for the worst "free-mar­ then say, 'By the way, we're going to pay ourselves a $1 ket" disaster brought about by the Donald Regan economic million bonus. '" policy, namely, the collapse of oil prices.This publication's Perot, the founder of Electronic Data Systems, is the founder, Lyndon H. LaRouche, Jr., joined earlier this year productpar excellence of the service industry; but he reflects with several oil-state governorsin demanding a variabletariff a view broadly sharedin the defense sector, namely, that the to set a mininum price for oil sold in the United States. Oil at collapse of the U.S. industrial base, let alone the disintegra­ the current level of $14-$15 per barrel implies a national tion of the industrial workforce, will rapidly make America security disaster, through the elimination of perhaps one­ indefensible. third of all domestic oil output; and the massive overstocking There are indications that a sort of economic activism has of oil inventories in the industrial world suggests that a much emerged in the Pentagon itself, starting with Defense Secre­ lower price is in the works. tary Weinberger. On Dec. 11, the Interstate Oil Compact Commission, Military sources report that the January release of the representing 29 oil and natural gas producing states, ap­ Defense Department's Soviet MilitaryPower book, will rep­ proved a resolution Wednesday seeking a variable import resent an intervention into U. S.economic policy. The object tariff on foreign oil. The resolution calls on President Reagan will beto clearly demonstrate to everyoneincluding the Pres­ and Congress to declare a national security emergency be­ ident that our current economic policy has created a strategic cause of U. S. reliance on foreign oil. danger to the United States.Two articles in this month's Air Gov. Mark White of Texas told the 350 delegates to the Force magazine cite examples. group's convention, that congressional approval is unneces­ The first article, a review of a speech by DIA official sary. "A tariff is the only viable alternative and the President Dennis Clift, stresses that the Soviets have completed their has the power to do it " by executive order, White said. "It strategic military modernization program in tandem with won't create any burdensome bureaucracy-we already have nearing completion of their Radar-ABM system. A second a token tariff on imported oil. All we have to do is move the articlereviews the collapse of the airline industry. The impact decimal point. " of this, according to the article, is a destructionof our ability The White House, preoccupied as it is, has offered no to produce and deploy fighter planes. new response. Nonetheless, even the Adam Smith-cultists of Meanwhile, Weinberger wants to rebuild the prostrate the Wall Street Journal have warned that the world's stock� U.S. machine-tool industry, according to the Dec. 8 edition piling capacity for crude oil is overflowing.The International of Aerospace Daily. Weinberger is expected to sign an "ac­ Energy Agency's latest projections issued Dec.10 must have tion plan " in December to revitalize the industry. Weinberger provoked panic in the relevent departments of government. will also decide whether DOD will put up $15 million in The lEA projected first-half 1987 oil-consumption growth at matching funds to set up a manufacturing sciences research only 1.6%, against a previous figure of 2%. This translates center. into 35.2 million barrels per day of oil demand, against 34.65 Another important signal came from former Deputy CIA in the first half of 1986; lEA projects total demand at 34.8 Director Adm. Bobby Inman, in an address to the Forum million barrels per day for all of 1986, versus 34.0 in 1985. Club of Houston Dec. 4. Inman said, "There will be new The report said that companies had built up stocks by an products and new industries developed in the future that will average of 600,000 barrels per day for the first nine months come fromour new technology, but the most dramatic impact of 1986, against a drawdown of 700,000during the firstnine will come fr om their impact on the existing industries [em­ months of 1985. phasis added]. It will help our potential for becoming suc­ Falling demand and rising stockpiles translate into a fur­ cessful on the global marketplace." ther oil price-collapse, with devastating implications for the Admiral Inman said high-technology developments in U.S. banking system. The administration's capacity to ab­ computers, biotechnology, aerospace, and communication sorb reality on this count will be an early indication of the must be put to use in the mining and agricultural industries. extent to which we are rid of Donald Regan.

EIR December 19, 1986 Economics 5 Thatcher leads European prime ministers in 'war on AIDS'

Meeting in London on Dec. 5 and 6, the prime ministers of demic" and warning that the slow-acting virus could not be the 12-nation European Community decided for the firsttime confined to so-called risk groups, which were only the "fast to coordinate efforts to combat AIDS. With Britain conclud­ track" of transmission of the disease. The report mapped out ing its presidency over the EC, British Prime Minister Mar­ the economic co-factors which help spread AIDS; described garet Thatcher spoke for the nations of Europe, declaring the scientific research frontiers' which must be opened in a AIDS to be the "new scourge," similar to the 14th-century "crash" research program to treat and prevent the disease; Black Death. and warned that only the immediate application of the "clas­ Britain's Independent Radio Network announced on Dec. sical" public health measures, used for other highly infec­ 6 that Thatcher was "declaring war on AIDS," and had de­ tious diseases, could keep AIDS from wiping out the human fined the 100% fatal epidemic as "the single most important race before a cure is found. challenge facing Europe." According to IRN, her concernis Over the past month, the actions taken in Europeon AIDS to launch "combined European efforts to combat the AIDS reflect a belated acknowledgement that EIR was absolutely menace," particularlyby upgrading cooperation on research. correct and that those who opposed it, including the World The European Council of prime ministers identifiedlinks Health Organization, were perilously wrong-as WHO di­ between the problems of AIDS, drugs, and terrorism. The rector Halfdan Mahler admitted on Nov. 19 , when he said final communique states: "The European Council expressed that AIDS could infect 100 million people within fiveyears . its concernabout the rising incidence of AIDS . . . they noted the link that existed with the drug problem." Britain pressed Great Britain for the establishment of "the firstinternational data bank" to Following the EC summit, British Secretary of State for deal with AIDS , along the lines of that already being estab­ Social Services Norman Fowler went on a "fact-findingmis­ lished to deal with terrorism.This would chart the growth of sion" to West Germany and the Netherlands. According to AIDS, and keep track of research efforts to combat it. the Dec. 10 Times of London, this trip is bringing to Fowler's The communique also underlined "the importance of co­ attention "the grim realities of the AIDS epidemic among ordinating the diverse national campaigns, with the aim of Britain's European neighbors." increasing public preoccupation, and preventing propaga­ Within Britain, the debate on how to combat AIDS is tion" of the disease. The European leaders also wished to expanding as the disease spreads. While some ministers and assure "an effective exchange of information, prevention, self-professed health experts are advising measures like free and treatment , together with upgraded cooperation in the syringes to addicts and distribution of condoms, others are field of investigation." looking into scientifically and politically competent means of dealing with AIDS. The Sunday Times of London reported Impact of EIR report on Dec. 7 that the U.K. Ministry of Defense will soon an­ Throughout Western Europe, serious discussion about nounce measures to combat the disease in the armed forces. the AIDS threat is being shaped by EIR's 140-page Special Service chiefs were meeting the week after the EC prime Report, "An Emergency War Plan to Fight AIDS and Other ministers, and will be sending their views on the AIDS threat Pandemics," issued last February. The book has been widely to the U.K. Cabinet Committee on AIDS, chaired by Lord circulatedto public health authorities, scientificlaborato ries, Whitelaw, "which is known to be particularly concerned and elected officials, in many cases purchased for them by about the potential threat to Britain's security." EIR subscribers who understood how importantit was to get this report out. Last summer, EIR's AIDS report was also France published in a full Italian-language edition. The European Labor Party in France (ELP) has released Back in February, EIR and its scientific collaborators the draftof a law which would force the French government were virtually alone in describing AIDS as a potential "pan- and health authorities to take decisiveaction against the spread

6 Economics EIR December 19, 1986 of AIDS . The bill was presented to the press in Paris Dec. 9 ident of the Schiller Institute in Italy. The Institute is using by ELP secretary-general Jacques Cheminade and Dr. John the EIR report to mobilize the population for emergency Seale, of the British Royal College of Physicians, one of the measures to stop the spread of AIDS . most prominent British backers of a "war on AIDS." Dr. Schiller Institute spokesman Marco Fanini noted during Sealestated, "No press hasreported the truth about AIDS . . . . a televised roundtable on AIDS over the major northeastern AIDS is a virological nightmare, a lentivirusof the retrovirus Italian regional channel "Tele Alto Veneto" on Dec. lO, that family which destroys not only the immune system but the it costs 300-400 billion liras to build one new hospital a1one­ brain, intestines, and lungs ...." Rather than being simply several times the figure allocated by the Health Ministry for a sexually transmitted disease, he said, "AIDS is character­ the entire program. istically a blood-transmitted infection. " Italy's "experts" are coming closer by the day to the The proposed law uses the guidelines of the EIR Special scientific standpoint of the EIR Special Report on AIDS, Report, and would extend existing French health regulations which has saturated the relevant circles in the Italian-lan­ to the specific threat posed by AIDS. The bill is modeled on guage edition. Only last May, at a conference on AIDS in laws that already apply to tuberculosis, hepatitis, polio, and Milan, the same experts were rabidly attacking the Schiller syphilis. It would provide for every resident of France to be Institute's "extreme" views. Now, from one end of the pen­ screened (for free) every six months, and every non-resident insula to the other, medical professionals are joining Schiller crossing the border into France to show an AIDS-negative spokesman in town meetings and television panels, to inform test certificatedating from less then six months before, or be the public on the reality that AIDS is a far greater threatthan tested , before he can be admitted into France. previously stated. Among other measures, the ELP-proposed law would In the cited television roundtable, Fanini was joined by also set up an AIDS research and treatment center in every Prof. Dante Bassetti, infectious diseases specialistat the Uni­ hospital; create a National Research Institute on AIDS; carry versity of Verona, who stated that besides bloodand semen, out mass vaccination as soon as a vaccine is available; and saliva is almost certainly a vehicle for the virus, and perhaps take measures of relative isolation for full-blown AIDS cases in certain situations, mosquitos. Bassetti also noted that in until an effective vaccine and cure are found. Verona he is treating more than 260AIDS patients with only The draftlaw called for annual expenditures of about $1.5 25 hospital beds available. When one day these 260 cases billion (100 million French francs), not including vaccina­ must be hospitalized, where will they be put? Bassetti said tion. he hoped new hospitals will be built for AIDS patients-like Less far-reaching measures were called for at a press the new very modem one in Houston, Texas-or at least new conference on Dec. 1 at the National Assembly, by National wings devoted to AIDS. Front parliamentarian Dr. Bachelot, in the name of his par­ The Schiller Institute and EIR's growing acceptance as liamentary delegation. "France is not at all prepared to face "the" authority on AIDS in Italy, was reaffirmed when the this infection ....If nothing is done to fight the contagion, health commissioner of Lombardy, Italy's most populous there will be no more people on the planet in the year region, Dr. Isacchini, appeared at a press conference on 2025. . . . AIDS is not just a medical problem, but a problem AIDS in Brescia on Dec. 19, hosted by the Schiller Institute. of political responsibility." He added that AIDS is potentially At the southern end of Italy, in the town of Alcamo in "worse than nuclear war," and that it might be transmitted by Sicily, the editor of the Italian edition of the E1R Special mosquitos. Dr. Bachelot proposed an "AIDS-atorium" to Reporton AIDS, Claudio Rossi, was guest of honor on Nov. isolate AIDS-sick individuals as well as a systematic screen­ 29 at a conference organized by the local Lions Club, "AIDS : ing of the high-risk population. He proposed organizing a The Greatest Threat to Human Survival," attended by llO "popular referendum" concerning measures which "would citizens. Alcamo Lions Club head Dr. Francesco Filippi be transitional" in the waiting period for the discovery of a opened the conference with a brief treatment of the medical vaccine. He also proposed, to finance this plan, launching a aspects of the disease based on the EIR study. He clarified state loan of 15 to 20 billion francs. that the transmission of the disease is not solely among "risk groups," where contagion follows a fast track, but that the Italy entire popUlation is at risk. Claudio Rossi, speaking for the The panic over AIDS has arrived in Italy, but the mea­ Schiller Institute, presented EIR's new computerized epide­ sures announced by Health Minister Carlo Donat Cattin and miological model for AIDS . publicized with great fanfare as a "War on AIDS," are inad­ On Nov. 28, in Salerno, an important city south of Na­ equate to the point of absurdity. The Italian government's ples, the local Red Cross invited the Schiller Institute's Gal­ anti-AIDS plan allocates a mere 50 billion liras (about $50 liano Speri to address a conference on AIDS. The more than million), "less than the top prizes in the popular national 100citizens who attended included the entire civic leadership betting game, Totocalcio," points out Fiorella Operto, pres- of Salerno and representatives of the localmilitary district.

EIR December 19, 1986 Economics 7 Soviet Economy

NEP, environmentalism, and military industry: a contradiction? by Luba George

On Oct. 28 the Soviet party newspaper Pravda published an real power behind the Culture Foundation, she is the daughter article marking the 65th anniversary of Lenin's October 1921 of the oldest surviving high-ranking official of the New Eco­ speech "On the New Economic Policy." This is only one of nomic Policy (NEP) under Lenin, Maxim Titorenko. a number of recent Soviet articles that have referred to the Zalygin is often referred to by the younger Soviet writers New Economic Policy, or NEP. as the father of novoe myshlen�e (the new thinking) or the In the past few months, Mikhail Gorbachov has spoken "New Age," pioneered by the "village prose" movement of openly about the relevance of the NEP experience for the the 1970s, which glorified the Russian countryside as the U. S. S.R. today. In his speech in the Soviet Far East city of repository of raw spiritual values. Out of this "village prose " Khabarovsk at the end of July, he called for "bold new poli­ movement, came the U. S. S.R. 's present-day "ecology" cies" to solve the Soviet Union's problems and spoke ap­ movement including authors of the Raisa Gorbachov salon­ provingly of NEP. like Valentin Rasputin, Sergei Zalygin, Chinghiz Aitmatov, The Western press, all aglow with these new signs of Grigori Baklanov, et al.-responsible, among other things, NEP as alleged signs of a "new period of de- Stalinization," for the "Save Lake Baikal" campaign and other demands that described Gorbachov as a "reform-minded advocate," who Mother Russia be protected from the ravages of pollution and has brought about Soviet "political pragmatism" and "eco­ mining. The huge "Project of the Century"-the River Di­ nomic liberalization." version Project, which would have channeled the water of the main Siberian rivers into arid Muslim Soviet Central Raisa's role Asia-was sacrificed, thanks to this campaign. The campaign to popularize the NEP goes hand in hand The monthly party theoretical journal Voprosy filosofii with the recent creation of a Soviet "Culture Foundation," (No. 4 1986) writes: Zalygin "threatened to shatter precon­ promoted by Mikhail's wife Raisa Gorbachov, who is on the ceptions, to destroy the stereotypes of cliche, ignorant judg­ lO-member executive board of the Foundation. The NEP ments about the most complex period (NEP) in our history, resurrection has been spearheaded by the "Culture Founda­ which has perhaps been least illuminated by science and art. tion's" literary friends of Raisa Gorbachov. Soviet writer Zalygin is the first . . . Soviet writer to devote attention to Sergei Zalygin, whom Alexander Solzhenitsyn placed sec­ the NEP period ...seriously, as an interested scholar, his­ ond on his list of "true Russian writers," was the first to set torian, sociologist, and artist." the tone when he wrote: "NEP is not a tactic but a strategy of Zalygin was recently appointed the new chief editor of socialism." Over the past 10 years, Zalygin has written and, Novy Mir (New World)-with half a million circulation­ with some difficulty, published his novel about the advan­ which has, since his appointment on Aug. 10 this year, been tages of NEP-Posle buri (After the Storm). spearheading Gorbachov's "glasnost" (openness) drive-on Zalygin, a leading founding member of the Soviet Cul­ such themes as the growing drug problem in the U. S. S.R., ture Foundation-to which the old American magnate and environmental issues and the NEP theme. In reporting the Kremlin friend Armand Hammer generously contributes­ appointment Aug. 10, the Yugoslav news agency Tanjug is a top Soviet propagandist for the New Economic Policy drew attention to the fact that Zalygin is probably the only (NEP), under Raisa's benevolent protection and guidance. chief editor of a Soviet journal who is not a member of the His role as a leading Soviet expert on NEP, and the content Communist Party of the Soviet Union. of his writings, have been monitored by Radio Liberty. Raisa The first part of Zalygin's 3()O-page novel Posle buri, herself is not only the wife of Mikhail Gorbachov, and the was completed while Brezhnev was still General Secretary,

8 Economics EIR December 19, 1986 but it got the green light only in May 1982 (in the journal bachov. One must bear in mind that about two-thirds of the Druzhba narodov) when the fonner KGB head Yuri Andro­ Soviet Union's industrial output comes from the Russian pov was effectively already in power. Following its publi­ Republic (as recently stressed at the session of the Russian cation, in March 1983, Literaturnaya Gazeta proclaimed that Republic's soviet, or parliament). Thus, the bulk of invest­ Zalygin was singing the praises of the "energy of NEP.... ments going to modernize existing industry means that in­ The novel provides a splendid reply: NEP is not simply a vestment policy is focused on the Russian Republic. Similar­ tactic but a strategy of socialism." ly, the bulk of the abandoned new big projects-typified by The second part of the novel was published in the issue the Siberian rivers water diversion to non-Russian, Muslim of Druzhba narodov for July, August, and September 1985, Central Asia-hit the subject populations of the Russian only after Gorbachov was already in power, and after Gor­ empire. The demands of the military high command and the bachov's protege, Alexander Yakovlev, had been appointed industrial modernizers, lead to the same results as those of head of the Central Committee's Propaganda Deparment. the Russian Partyenvironmentalists. Pravda gave the official evaluation of the novel on May 30, The same is true concerning the resurrection of the NEP. 1986: "Sergei Zalygin has taken it upon himself to explore The NEP of Gorbachov envisages employing productively­ on a fundamentally new artistic level a phenomenon, the in a private sector-strata of the population such as pension­ essence of which, let us not forget, was conceived as a pro­ ers, housewives, or students, who are not engaged in any gram by Lenin.NEP ...was not simply an economic mea­ labor for the state. Why not set up a mechanism whereby sure.The experience ofNEP also provided special conditions these groups of the popUlation can help solve critical bottle­ for the social and spiritual transfonnationof man. . . .That's necks in the horribly inept service, repair, and handicraft­ what Zalygin's novel is about: about man, about his fate at a manufacturing sectors of the Soviet economy? critical time. . . .About how' a new energy in thinking' must From the firstdays after the Bolshevik Revolution, Soviet be discovered in man, without which rational life and the military and defense doctrine has been guided by the "Frunze improvement of life is impossible.The latter, in tum, is the principle " (named after one of the leading Soviet military only means to save the world and oneself." theoreticians, Mikhail Frunze, whose writings still influence Zalygin, together with Grigori Baklanov, the editor of Soviet commanders like Marshal Nikolai Ogarkov and Soviet Znamia, is a member of an eight-man special commission defense policy) that the economy, particularly industry and created by the Soviet Writers' Union which is responsible for its technological base, takes precedence over even the build­ stepping up the publication of works along the Gorbachov­ ing up of the arms arsenal; in this way, the horse leads the Yakovlev "new thinking" line. cart. Frunze was noted for having called on industry to be more responsive to the requirements of the military for R&D The military-industrial angle and for faster technological change in all sectors, not just the How does this movement representing the "new think­ arms sector. Thus when defense options are considered, all ing," so often referred to by Gorbachov in his speeches, fit Soviet political and military leaders support the continuing in with Soviet Marshal Ogarkov's and the "Russian Party"of growth of the economy and raising the level of technological the Soviet leadership's drive for world hegemony? The NEP capacities as first priority. and the "democracy" that goes with it, as well as the "ecolog­ This dual-strategy-prioritizing the development of the ical" side of its campaign, in no way hinder the Soviet mili­ U.S.S.R.'s technological base, while resurrecting NEP­ tary from doing what it has to in the period ahead to attempt could be seen at the VI Congress of Writers of the R.S. F.S.R. to achieve absolute military superiority. (Russian Federation of the U.S . S . R. ), where in his keynote Russian Party "environmentalism" is in no way compa­ address the president of the union, Sergei Mikhalkov asked: rable to the Green radical-environmentalist Jacobinist plague "Is man morally prepared for the headlong acceleration of sweeping the West. Raisa Gorbachov' s NEP "ecologists" are technical progress by leaps and bounds, and is the writer not opposed to nuclear power, and never express any oppo­ himself up to date with the current state of the scientific­ sition to programs of either the Soviet military or the Russian technological revolution and its future?" military-industrial complex. Furthennore, their campaigns The U.S.S.R.'s "poet laureate" and one-time "angry in the literary world, such as attacking certain big projects, young poet" of the 1950s, Yevgeni Yevtushenko, inhis speech are fully in tandem with the massive tilt in Soviet investment de-coded some of the NEP's hidden Russian chauvinist ele­ policy under Gorbachov. Under the Gorbachov priorities of ments: "Spiritual progress," said Yevtushenko, means hav­ modernizing Soviet industry, there has been a vast increase ing the courage of Lenin, "to attack the new Soviet bureauc­ in investments to modernizeexisting industry, making it both racy and communist arrogance ... [to] fearlessly put the more efficient and less polluting; to accelerate the construc­ country onto the footing of the New Economic Policy." But tion of non-polluting nuclear power plants; increase railway it also would mean for "the people . . . to analyze its own electrification; and so on down the line. errors and tragedies, "so as to become 'spiritually invinci­ There is another facet to this investment tilt under Gor- ble'. . . . For us, mankind begins with the Motherland."

EIR December 19, 1986 Economics 9 From New Delhi part with the crude oil and other products that are dollar productive for themselves. They have continued to periodi­ cally flex their considerable muscle in the form of arbitrary denial of orders to Indian prod\lcers almost entirely depen­ dent on the Soviet market. The warning shots came in 1983, when orders for cashew nuts, textiles, and other staples of the trade plunged. Even today, in spite of a promise to raise textile importsfrom India to 500 million meters per year,the 1987 annual trade plan projects imports of just 100 million Indo-Soviet trade: meters, down from220 million meters last year. Nonetheless, Rajiv Gandhi and Mikhail Gorbachov have rubles and rupees announced a commitment to raise trade turnoverby 2.5 times by the year 1992. A special committee set up on the Indian by Susan Maitra side to carry throughon this commitment has produced a list identifying more than $1 billion worth of Soviet products appropriate for export to India. At the top of the list is crude The celebrated 1953 Rupee Trade Agreement between Mos­ oil, steel, diesel locomotives, and chemicals. Also identified cow and New Delhi is undergoing stress and strain. Though by the Indian side are some 70 areas that offer good potential the agreement on economic and technical cooperationsigned for production cooperation, including the automotive and on the occasion of Mikhail Gorbachov' s state visit to New textile industries. So far, according to first reports, India's Delhi Nov. 25-28, 1986 was billed by some as opening a efforts to enter joint-venture projects with the Soviet Union "new chapter" in Indo-Soviet economic cooperation, it might have beenhamstrung b y the Soviet demand for a 51 % partic­ bemore accurate to say that the Soviet 1.2 billion rublecredit ipation in the equity capital of the ventures, implying Soviet coveringfour large projects was sufficientlydramatic to pre­ control of the ventures which India cannot accept. vent the book from beingclosed . The announcement a week later that the Soviet Union had The trade pattern decided to increase crude oil exports to India in 1987 from The backdrop to the difficulties is actually the develop­ 3.5 t04 million tons, and had a proposalfor another .5 million ment of India's economy. In the mid-1950s, when India's ton boost under consideration, is more revealing of the actual economic relationship with the Soviet Union began, the co­ state of Indo-Soviet economic relations, which for the last operation focused on the development of basic industry, and six years or so have been a battleground. At issue is a large the bulk of India's imports from the Soviet Union consisted trade imbalance in India's favor, which reflectsthe divergent of equipment and machinery. Since India's economy has requirementsof the two nations' economies. developeda fairly broad industrial base, the requirementsfor In 1979, with an accumulation of Soviet ruble balances machinery imports have fallen considerably, and India's main resulting largely from defensesupp lies, Indian exports to the preoccupation in the Rupee Trade Agreement is to increase Soviet Union began to soar. The Soviet demand for agricul­ the import of those items which would otherwise cost hard tural raw materials such as cashews and mangoes and for currency. consumer goods-from soap and detergent to textiles and In this sense, the large new Soviet project credit an­ shoes-appears insatiable, and whole industries sprang up nounced during the Gorbachov visit shifts attention from the on thestrength of the Soviet market. An Indian trade surplus real difficulties in the trade relationship, and recalls the best with the Soviet Union of nearly $200 million grew to about of the Soviet economic relationshipto India. It was, after all, $550 million by 1983. While total trade turnover doubled in the 1950s, when Indian requests for assistance in building from 1981-84, by 1986 India's surplusstood at $700millio n. up a steel industry were rejected by the United States, that Thoughin real terms, the Indian surplus represents akind the Soviet Union stepped into the breach. Since then, out of of surplust o the Soviet economy, Indian officialshave been 220 public-sector enterprises in India, mostly in heavy in­ in no specialhurry to restore balance.In 1983, India began dustry, 83 have been built either wholly or partly with Soviet accepting "technical credit"to cover the imbalances-credits assistance. Projects constructed with Soviet aid account for that jumped from $35 million in 1980 to some $1 billion in 40% of India's iron and steel production, 80% of its metal­ 1983. At thesame time, India continued to pressfor increased lurgical equipment, about 40% of mining equipment, about importsof Soviet crudeoil, fertilizer, and several other items 55% of power-generating equipment, and some 10% of elec­ that would otherwise cost India precious foreign exchange tric power generating capacity, besides a significant share in on the international market. the oil and oil products sector. For their part, the Soviets' anxiety to redress the trade The latest creditshave been extended for theconstruction imbalance has been coupled with a determined reluctance to on a turnkey basis of four projects: one, a large, 2,400 me-

10 Economics EIR December 19, 1986 gawatt hydropower project in the Tehri region, the modern­ Currency Rates ization of the,B,okaro .steel plant, the setting up of four un­ derground mines to raise annual coke and coal production The dollar in deutschemarks capacities by about 8 million tons, and, finally, on-shore oil New York late afternoon IIxI .. exploration in West Bengal. The Soviet credits carry an in­ terest rate of 2.5%, repayable in 17 years in equal install­ 1.30 ments, due three years after the date of utilization. The Soviet credits also include the provision for financing of local ex­ 1.10 pensesof the Tehri power project. Large as it is, the Soviet credit has been criticized in some 1.U, quarters forbeing a lot of "show." The critics point out that, ." based on past experience, Soviet credits take years to mater­ 1.00 / � i\.. ialize, and the economic effect is not as dramatic as it might ..., I""""� seem. On past experience, the credits are actually used only 1.90 10;28 1114 11111 11118 11125 IZil 1 for the purchase of equipment, something that tends to be the I III last phase of the project, and delays have been frequent. The The dollar in yen critics also point out that, for this very reason, there is already New York late afternoonflxllll a large amount of Soviet credits that are as yet unused. They also point out that the turnkey provision of the assistance 190 leaves relevant Indian industrial capacity out in the cold. In response, the government has argued that, since its own 180 ability to proceed with these projects is limited by a lack of financialresour ces, the Indian capacity would not in any case 1711 be used, and therefore it is better to take advantage of the ..... 160 Soviet credits to get these projects going. .. � 1"--',....-- r- 1541V 101ll 10/28 1114 11111 11118 11125 Ilil IlI9

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EIR December 19, 1986 Economics 11 West German Economic Survey

Behind the 'stagnant recovery,' a deep economic recession threatens

by William Engdahl

For almost two years, the West German Bundesbank, major Germaneconomy in the next 6-18 months are buriedslighdy economic institutes, and the Bonn coalition government of below the surface of the GNP numbers, and they arefar more Christian Democrat Helmut Kohl, each for their own rea­ troubling. sons, have proclaimed an "economic recovery." Continued adherence to this illusion could have devastating results for Trouble on the horizon West European economic growth prospects over the coming The I2-nation group known,as the European Community decade. We take a detailed review of the actual production (EC), has a population of 322 million and Gross Domestic sector of the Federal Republic of Germany , which represents, Product of $2.4 trillion in 1985, which make it second only with the possible exception of Japan, the most important to the United States as an economic power, and in some areas, industrial-technological base in the world today. more important. In terms of total world trade, the EC, with First, as in the United States and most Western OECD France and West Germanyas its weightiest members, is even economies, national accounting is based on a built-in fallacy: more significant than the United States, with a 15% share of "GNP accounting." By this method, the monetary index of the market, versus the United States' 11 % last year. all economic activity-productive as well as non-productive, The West German economy is the most productive core it does not differentiate-is totaled. So long as the aggregate of the European Community. It is sustained by three major number is growing, one should assume all is well. By GNP industrial areas-automobile production (Europe's largest), standar.:is, the West German economy grew in 1985, the year chemicals (Europe's largest), and engineering goods (Eu­ of the rapid dollar rise and, beginning in September, fell just rope's largest). The strategic center and traditional strength as dramatically. Gross National Product totaled 1.847 trillion of the West German economy is its engineering sector, which D-marks. In 1984 , it was DM 1.763 trillion. By conventional produces machines, plant and eCjluipment, and generates the economic wisdom this is a husky 4. 8% annual increase in technologies which give other btanches of German industry, GNP. This year, though the size of the number has been such as automobiles and chemicals, their competitive edge. slipping each quarter, predictions still call for a respectable The German recession of 1981-82 was largely induced 3% growth range in German GNP. In a recent series of by the combined impact of the 1979 U. S. interest rate policy articles in the largest German paper, BUd Zeitung, former and the Iranian "oil price shock;" as well as the collapse of Economics Minister Otto Lambsdorff exulted, "The turna­ developing-sector export markt$ such as Brazil, Mexico, round celebrates its fourth birthday. " Calling it Germany's and Argentina. Unlike most of American industry, German "Second Economic Miracle " of the postwar period, Lambs­ engineering industries responded to the collapse of export­ dorffcited such signals of "strength" as the fact the D-mark market share by an intensive effort at technological modern­ has "not been so strong in 10 years. " ization. The result has been a rapid and impressive improve­ Few are as euphoric as Count Lambsdorff, but every ment in the quality and sophistication of West German nu­ leading economic institute and major partyin the parliament merically controlled machine tools, industrial robots, and agrees that the Kohl government is benefiting from good other products which have made the German auto producers economic news in the lead-in to the Jan. 25 federal elections. such as Daimler-Benz, VW, and BMW the world standard . The real indicators of what will develop in the finely tuned The West German machine tool sector is especially stra-

12 Economics EIR December 19, 1986 FIGURE 1 Engineering new orders Index

.' . ' .

135 ". New orders­ .... foreign 125

115

105

95 New orders­ domestic

85

75

1982 1983 1984 1985 1986 Quarterly average

Adjusted price index: 1980 sales = 100 tegic, because of its world export importance and its relation work-week limits on existing personnel. ''The 38.5-hour week to producing other industrial machines. Without machine and the lack of qualified labor power," Lundkvist stresses, tools, a modem industrial economy soon vanishes. Although "have caused us to lose orders to foreign producers." He Japanese output of specifictypes of machine tools has greatly estimates this to be as high as 15% per year. The result has increased in the last decade, following its reworking process been a deluge of Japanese and, to a lesser extent, Swiss and from 1983 to 1985, today the German industry remains unex­ Italian machine tools into West Germany, as the German celled in quality and diversity by any other national sector in industry is already running at 94% capacity. Hardly proof of the world. Beginning in the recession year of 1982-83, this an impending recession. But let's lookcloser . position began to be reflected in the steady increase in new According to the German Machine Tool Association, orders. New orders for machine tools can be taken as one of VDW, new orders continued to drop for the first nine months the most sensitive indicators of real industrial growth pros­ of 1986. The largest drop is in the vital export sector, where pects, indicating what the economy will do 12 to 18 months new orders collapsed in nominal terms by 18% through Au­ from now. gust. In monetary terms, the value of new orders for the ma­ The currenteconomic wisdom is that the German "recov­ chine tool industry rose from just over DM 8 billion in 1983 ery" is being carriedby expansion in domestic industry, rath­ to DM 14.4 billion by 1985. The dollar rise against the D­ er than export. This is being pushed among other things to mark from 1984 through most of 1985 meant that the high­ resist the wild and erratic pressures from Washington, espe­ quality German tools were able to make a serious impact on cially from the Treasury and Federal Reserve, for the Federal the U.S. market. By 1984, the United States had become the Republic to "stimulate" its domestic economy by further largestimporter of German machine tools. West Germany is lowering interest rates. While one can sympathize with re­ today the world's single largest exporter of machine tools, sisting wrong economic policies, whatever the argument, this exporting 26% of the machine tools exported by Western "domestic-led recovery" is a dangerous fraud. industrial countries. Fully 62% of the industry output in 1985 It is true that domestic machine tool orders have risen went to export markets: principally to France, Italy, U.K., 12% for the nine months through September. But given the and other European Community trading partners, as well as fact that it is an export-directedindustry , despite the domestic to the United States. increase, there has been an overall order drop of 5% in the According to the head of one of Germany's leading ma­ firstt hree quarters this year, comparedto 1985. chine tool makers, L.G. Lundkvist of Friedrich Deckel AG, A look at the engineering sector as a whole reveals a more Munich, the industry is at a relative stasis point. The problem worrisome crisis brewing. Superficially, the sector appears is a relative lack of skilled labor, combined with trade union healthy: Gross sales for the January-Septemberperiod were

EIR December 19, 1986 Economics 13 DM 103 billion, a gain of 2% from 1985. Overall industry the industry production levels, despite reassuring statements • capacity utilization, is 88.4%-a veritable "boom" by cur­ from HerrBangemann ' s Economics Ministry in Bonn or the rent U. S. engineering industry standards. Employment in the economic institutes. branch is running 5% higher than last year, at 1,080,000. The United States export market is extremely importaiii ' . Even exports in nominal terms are running up by 6% over for West Germany in all regards , despite politically motivat­ 1985, at DM 63 billion through September. This sector in­ ed denials by Bundesbank chairman Karl-Otto Poehl in New cludes, besides machine tools, agricultural equipment, tur­ York recently. Schiele points out that this market has almost bines, motors , construction machines, printing equipment, doubled for the engineering sector since 1983, from DM 6.3 and textile machines-in short, every significant tool of an billion to more than DM 10 billion in 1985. "The U.S. has industrial economy . become the most important marketfor our industry branch," But behind the positive monetary signs, storm clouds are he stressed at the end of October. Because of the wild fluc­ gathering for the German engineering industry. If we take a tuations in relative currency prices over the past months, the "stop-action" time photograph of the entire industry as of last West German VDMA head anticipates that export results by April, it appears to conform to the Bundesbank and Bonn 1987 to this crucial market, at present trends , could be neg­ Economics Ministry predictions of a domestic "upswing" in ative. Already, the rate of decline in this market is being the face of export decline. Then, in April-May, domestic immediately felt in the sharp dropof new orders being placed new orders begin a reversal and start to track exports in a for machinery and engineering goods. No major West Ger­ steep/all (Figure 1). This steep decline in new orders contin­ man producerin such uncertainconditions is rushing to make ues through November, according to industry sources. We a big new investment in capacity expansion . can date the onset of the second industrial recession since But it is not only one sector, albeit a major one , of indus­ 1980 for Germany from this April-May downturn in new try which is being hit by a sharpfall in new orders . According orders for engineering goods . The results in the chemicals to the November report of the West German Association of sector which follow, will fu rther underscore the down-pull Savings and Farm Banks, BVR, the largest regional banking under way, even though it has yet to severely hit daily pro­ network, overall new orders for the entire manufacturing duction levels. sector, which is far larger than engineering, are down. This -.The current president of the Association of German En­ downward trendbegins slightlylater than for engineering, as gineering Industry, VDMA, Prof. -Dr. Otto H. Schiele, de­ might be expected. But it begins by the end of July, only two scribed the recent increase of domestic investment in new months after the engineering downturn . Domestic new orders plant and equipment as a long-delayed retooling , which had stagnate at 0.0% in August and actually begin a decline of been postponed by the uncertain markets since the economic 2% by September over the preceding month. Foreign new shOCks of the late 1970s, and was finally set into motion in ordersare currently falling more sharply, at a rate for the nine anticipation of export to the long-awaited international eco­ months to the end of September of almost - 4% . nomic "recovery," especially of the United States. But, as Dr. Schiele notes with concern, "for an accumu­ Second Davignon Plan a�ead for steel lation of reasons, our exportbusiness is weakening. " Schiele West Germany today, as traditionally, concentrates cites four interconnectedreasons why new orders in German Western Europe's most important steel-producing industry. machinery andequipment exports collapsed 13% in real terms Current "wisdom" in Europe, though less advanced in this for the period January-September 1986: direction than in the United States,is that steel is a declining • The collapse of the dollar-35% against the D-mark industry. For fiveyears , West European national sectors have since October 1985-which set off a staggering reversal in savagely destroyed capacities, adjusting to financial com­ competitiveness for Germanexports not only to United States munity demands to permanently shrink output. The steel but to third markets tradingin dollars . crisis is in reality no steel production crisis. Rather, it is an • The drop in oil and gas prices, which has collapsed induced crisis in response to the 1974 and subsequent 1979 industrial exports, especially to OPEC states, and severely oil-price-rise shocks together with the post- 1979 interest rate damaged the large petroleum equipment exportpossibil ities. policy of the OECD central banks. To destroy capacity for • Thelack of importgrowth in the traditional developing future production is to ensurea shrinkage of future industrial markets such as those of Mexico, Brazil, Argentina, Egypt, base and walk away from an active export-oriented solution and Nigeria. to economic growth stagnation. The Davignon Plan was and • The lack of any real increase of demand from the is a bank "rationalization" scheme designed to protect certain Soviet market despite the new Soviet Five Year Plan, due to book-values of present debt at the expense of future national hard-currency shortages as well the Chernobyl problem. capacity to produce. To its credit, the West German steel The traditional export share of West Germany's engi­ industry has been one of the more cautious about destroying neering sector, is even larger than for machine tools. It is such capacities. British steel is at the other extreme, where currently fully 65% of total production. Again, it is clear that blast furnaces were blown up under the infamous "Lazard's German industry internally cannot sustain any long rise in Plan" of investment bankers. The best index of utilization of

14 Economics EIR December 19, 1986 steel is ton-per-capita consumption. By this index, since the initial 1980 Davignon five-yearEuropean steel reduction (eu­ TABLE 1 phemistically termed "rationalization"), German consump­ The EC and world fleet 1975-85 tion has declined by some 5% per capita. EC World EC •• '" This said, the West German steel industry today is a of world reflection of the overall problems of collapsing international 1stJuly No. mn dwr No. mn dwt (dwt) trade. In 1974, termed by the industry the "beginning of the crisis of the steel industry," some 250,000 workers were 1975 9,636 154.9 34,934 544.2 28.5 employed in producing steel in the Federal Republic of Ger­ 1976 9,621 165.5 35,666 598.4 27.7 many. When the Davignon Plan started in 1980, the number 1977 9,443 168.5 36,208 637.2 26.4 had already droppedto 190,000. By 1986, following the five­ 1978 9,684 177.6 36,880 658.7 27.0 year termof Davignon reductions, it stands at 150,000. To­ 1979 9,539 177.2 37,668 669.0 26.5 day , according to the West German steel producers associa­ 1980 9,467 178.2 38.401 677.3 26.3 tion, Wirtschaftsvereinigung Eisen-und-Stahlindustrie, this 1981 8,975 179.6 37,959 683.2 26.3 is still not sufficientto control falling prices. They propose 1982 8,508 169.7 38,416 687.2 24.7 to cut some 20,000 more jobs from German steel beginning 1983 7,971 155.5 38,419 678.6 22.9 sometime shortlyafter the Januaryfederal elections. 1984 7,502 141 .1 38,103 666.8 21 .2 Recent industry assessments have underscored that, de­ 1985 7,265 138.9 38,048 665.8 20.9 spite two years of trend reversal by the highly modem and efficientWest German industry, by all accounts the world's quality standard in steel production, the industry is still in Note: refers to trading ships only and does not include ships registered in overseas dependenciesof some member states. great difficulties. Domestic production for 1986 will runless • million dead-weight tons than 38 million tons. This is a big drop from the rising output for 1984-85. By 1985, German steel produced 40 .5 million tons of raw steel. According to industry sources, the main problemimmediate ly is an indirecteffect of the drastic dollar fall against the D-mark. Import steel is able to be shipped in TABLE 2 from halfway across the world at competitive prices to the CompOSition of EC and world fleet domestic German market. at 1 st January 1985 In the fiveyears of restructuring, the West German steel EC as% industry has put itself through a major forced change. Raw Total EC World of world steel capacity has been cut by 20 million tons, and rolled No. mn dwt No. mn dwt (dwt) capacity by another 10 million tons. To retain competitive­ General ness with especially new Japanese mills, the German steel cargo 3,942 19.8 21,123 108.9 18.2 industry has invested in the most efficientadvanced technol­ Cellular container 245 6.0 956 18.1 33.2 ogies to the point that today, more than 80% of production is Ore/bulk continuously cast steel. Specialized high-quality mills have carrier 1,048 39.5 5,052 188.2 21 .0 been developed. Computerization has been extensive. Some Combination DM 10 billion have been invested in the process since 1980. carrier 81 10.2 437 46.6 21 .9 This is the situation as the EC is contemplating removal Passenger of Davignon-term protective barriers which have guarded and ferry 386 0.8 1,301 2.4 33.3 German and other European steel producers from a flood of Other dry cargo 76 0.5 756 5.6 8.9 cheap imports. As early as March 1987, the EC in Brussels Total dry could remove the Davignon protective restraints. In such a cargo 5,778 76.8 29,625 369.8 20.8 regime, German industry sources predict a bloody and un­ Oil predictable trade war which could devastate the remaining tanker 1,143 58.8 6,620 279.2 21.1 industry. The biggest demand market for the German steel Chemical industry is the metal-working, engineering, and motor-car tanker 145 0.9 880 6.1 14.8 industries. A major drop in production there, of cou�, will Liquidifed gas carrier 163 2.2 776 10.3 21.4 aggravate the pressures already mentioned. Already 40% of Other tanker 36 0.2 147 0.4 50.0 German steel consumption is imported. Only 25% of this is Total tanker 1,487 62.1 8,423 296.0 21.0 from other EC nations. Exports are under major constraint. Total all The EC-U .S. steel trade agreement became fully operational M1lpa 7,265 1 38.9 38,048 6654.8 20.9 this year and puts a ceiling on Germany's most important export market for the next four years. By the formula, Ger-

EIR December 19, 1986 Economics 15 man steel exports to the United States fall proportionately as tradingnation , historically, has. been to exercise controlover · domestic U . S. demand furtherweak ens, as the present reces­ transportation costs. This dictates a serious alarm over the sion collapse portends there. EC shipyards, especially the West German yards(See Tables But the secondary effect of the universal U.S. import 1-6). , ceiling on steel means that other steel exporters must compete Despite the clear national and EC interestin maintaining for a shrinking market. Price wars and dumping are expected such strategic resources, since the first oil shock hit world to escalate in coming weeks, while the high D-mark is already trade in 1975, EC shipyardshave cut employment 46%. This nurting German export capabilities. Rupert Vondran, man­ will fall 25% more by summer 1987. The backdrop for this aging director of Wirtschaftsvereinigung Eisen-und-Stahlin­ collapse is not mysterious. Total world trade tonnage has dustrie in Dusseldorf states, "It is importantnot to confuse a fallen since the second oil shock and interest rate shock of healthy appearance with well-being." Moreover, "environ­ 1979, from 19 billion ton-miles down 26% to 14 billion ton­ mental" levies on German steel of DM l00/ton must soon be miles (see Figure 2). But select Far East shipyards have imposed, further cutting profit margins. This is on average increased output at cut prices, especially Japan and South four times the rest of EC levies. Korea, and the Soviet fleethas increased by more than 42%, according to industry estimates since 1975. The end of Europe's last major shipbuilder For the case of the German shipbuildingindustry , annual For some years, West Germany has concentrated the steel supplied to shipyards plummeted from a high of 772,000 largest and most advanced shipbuilding capacity in the Eu­ tons in 1975 to 238,000 in 1984. Deliveries (BrutRegistered ropean Community, with the largest annual tonnage of ships Tons) went from 2.3 million BRT in 1975 to less than 0.44 built in the European Community. In terms of tons of steel by 1985. But this year the dam broke, as backlogs of old consumed, however, the precipitous decline of this sector is orders have been worked up and the soaring D-markhas made shocking. Although by no means as drastic as the case of export orders disappear. In July HarmstorfYards , German­ Sweden-which 10 years ago was the world's second largest y's fourth largest yards, declared bankruptcy. According to shipbuilder behind Japan, and today is virtually out of the a report in the Oct. I, 1986 Financial Times of London, the business-German shipyards are today in the worst crisis in worst drop in new orders for shipbuilding has hit the German history and getting worse. yards. For the first six months of 1986, German yards had68 The EC is the world's single largest trading area. Some new ship orders, in contrast to the same period in 1985, when 95% of its trade with non-EC countries is seaborneas is 30% the figure was 395. The labor-force has plunged 25% from of the trade among the EC countries. Fully 45% of world 1980, from 57,000to under 45 ,000at the beginning of 1985. seaborne trade is carried by the EC as a group. A cardinal rule for national and regional economic self-defense for a Germany's chemical industry: crown jewel tarnished Since the technological revolution sparked late in the last century by circles around the father of modem industrial chemistry, Justus von Liebig, Germany has been in the fore­ TABLE 3 Average age of EC and world fleet front of the world chemical industry. Names such as Bayer, 1 st July 1984 age distribution Hoechst, BASF are known woddwide. Combining associ­ ated mining and products industries, the total West German EC World chemical sector in 1985 was responsible for DM 1,304billi on Range 011 Bulk 011 Bulk (years) lankers carriers Others lankers carriers Others

0- 4 7.12 17.26 19.34 11.27 26.55 17.44 5- 9 39.08 24.94 28.54 41 .07 25.71 24.45

10-14 31 .39 31 .90 23.34 31 .71 23.75 26.20 TABLE 4 15-19 14.80 19.15 13.22 8.92 17.09 15.06 Tonnage on order by type at 1 st January 20-24 4.70 5.57 7.68 3.95 4.67 8.28 1985 25-29 2.25 1.07 4.42 1.88 0.83 4.24 For Bulk 30 + 0.66 0.1 1 3.46 1.20 1.39 4.32 Tankers Others Total reglslra- carriers 100 100 100 100 100 100 lion in No. mn dwt* No. mn dwt No. mn dwt No. mn dwt Average EC 62 2.3 74 3.4 196 1.6 332 7.3 Age (yrs) 11.51 11.22 11.92 10.68 10.28 12.62 World 31 1 10.8 531 24.9 735 9.9 1,577 45.6

Average age of total fleets: EC: 11.55 World: 11.19. Note: Calculation based on girt, includes non-trading ships. 'million dead-weight tons

16 Economics EIR December 19, 1986 of the Gennan industrial product. The direct chemical indus­ trywas responsiblefor DM 149 billion. FIGURE 2 Next to the automobile and engineering industries, the Why there is a shipbuilding crisis: seaborne Gennan chemical industry is the most heavily export-depen­ trade 1960-85 dent branch of Gennan industry. According to the report of Trillion ton miles the Gennan Chemical Industry Association, in 1985, West Gennany exportedfully 52% of its product. This is the sec­ ond most importantexport sector of the export-oriented Ger­ man industry. Fertilizers, pesticides, phannaceuticals, plas­ Trade collapses tics, and industrial chemicals-all are major export items for 20 following the world industry . 1979 oil crisis The statistics seem to show that this industry is prosper­ ing. Despite setbacks in oil prices and foreign exchange, company profitscontinue to be positive. On Nov. 7, Dr. Hans Albers, president of the Gennan Chemical Industry Associ­ 15 ation, noted thatthe "domestic" results for 1986 were "good." But, he cautioned, the overall results for this year of gross oil crisis sales for the entire industry will be "some 6% lower." The reason? The "collapse of the U.S. dollar and the fall of the price for crude oil," says Albers. 10 Does this presage a deeper decline in coming months? To give a comparison, the "recovery"of the total chem­ ical industry in 1985 was coincident with the extraordinary competitive shift in export tenns of trade between the D­ mark and the dollar, which lasted until the last quarter of 5 1985. The industry began its downward slide along with the 1. Golden age of 1960s fall of the dollar at that time. But, if we look historically, even the good year of 1985 only achieved a production level 4% above 1980. And the previous four years before 1985 below have all been the production level of 1980. It was in Year 1960 1965 1970 1975 1980 1985 1980, of course, that the combined impact of the second "oil shock" and Paul Volcker's high interest rate policy began to Source: Feamleys and U.N.O. devastate long-tenntrade and industry worldwide. So far in 1986, according to industry sources, production is down in the major sectors of agricultural chemicals (fertil­ izers, pesticides etc .), industrial chemicals, and phannaceut­ icals. and vehicle branch. For the 10 months through October, the combined vehicle (cars, truck, special vehicles) production Automobiles: the only thing left? of West Gennany reached 3.83 million units, according to The only major branch of West Gennanindustry to record a rise in actual production levels this year is the automobile

TABLE 6 EC trade by sea

TABLE 5 Total '10' World (mn tons) (mn tons) EC as % Tonnage on order for registration in the EC as at 1 st January 1985 Loadings 1980 31 1 3,650 8.5 1982 352 3,249 10.9 On order In No. mn dwt 1983 396 3,090 12.8 EC yards 208 2.9 Unloadings 1980 996 3,650 27.3 Non-EC yards 124 4.4 1982 879 3,249 27.1 Total 332 7.3 1983 875 3,090 28.3

EIR December 19, 1986 Economics 17 the German Automobile Industry Association. This is a re­ spectable 3% above one year earlier, also a strong year. Since the low year of 1981 , each year's output has climbed, inter­ EIR rupted only by an extraordinary strike in 1984. European Special lleport industry sources regard the German auto industry as the pre­ mier European , and the technological leader for high-profit margin lUxury autos such as Mercedes, BMW, and Audi. "Germans today are one or two steps ahead of the Japanese An Emergency in introducing new technology," one London industry analyst notes. One reason is the intensive teChnological upgrading of War Plan to Fight the productive plant over the past decade. Introduction of assembly robots and computer production technologies in West Germany is the most advanced of any West European industry. The largest West German manufacturer of industri­ AIDS al robots is VW, also Europe's largest car producer. But VW consumes virtually its entire production in-house, according EIR 's Biological Holocaust Task Force has prepared to industry sources. the world's only science-intensive "Emergency War Beginning in October, even this "bright spot" of the Ger­ Plan to Fight AIDS." The newest discoveries of opti­ man economy began to show disquieting signs. According to cal biophysics and advanced laser technology can the industry association, the rise in vehicle production stopped improve diagnosis and lead :to research break­ throughs-if governments move now. flatin October compared with the previous year. Exports also The War Plan begins with the President of the stopped flat. More troubling is the fact that despite the 3% United States, in his capacity as civilian leader and production rise through October, the ten-month export vol­ commander-in-chief, declaring a War on AIDS and ume in real unit terms of vehicles was down. The result for invoking National Emergency powers to avert disas­ auto exports "is overshadowed by the low level of heavy­ ter. In parallel, heads of state of other nations of the Western alliance shall declare war on this truckexports ," a spokesman for the industry emphasized. scourge to mankind. A ISO-page Special Report for governments, sci­ Best index of the economy: employment entists, public health officials, and all citizens con­ This dark picture is underscored by the stark fact of enor­ cerned with a policy to fight AIDS, before a mously high unemployment. Even discounting the political pandemic wipes out millions. manipulations of statistics on the "officially"jobl ess, West Contents German unemployment remains extraordinarily high. Ac­ I. The emergency war plan to fight AIDS and other cording to a Nov. 13 report of the West GermanLabor Min­ pandemics istry, while 1986 is the "first year since 1979-80 when the II. The real story of AIDS in Belle Glade, Florida absolute number of unemployed on average will be lower," III. AIDS in Africa: the unfolding of a biological holo· it will still show 2.23 million unemployed compared with caust 2.30 million in 1985. However much the "improvement" IV. The biology of AIDS represents political gimmickerybefore the national elections V. Flow cytometer and other laser technology poten· in January, it is clear that there is no actual "recovery." tial for combatting AIDS According to Ulrich Cramer of the German Institute for VI. The relevance of optical biophysics for fighting Labor Market Research, "persons who are for a short period AIDS: designing a Biological Strategic Defense Ini· tiative (BSDl) unemployed often do not appear in official unemployment statistics." But another indicator of the depth of the problem VII. How Kissinger and Pugwash destroyed America's biodefense against AIDS and other deadly diseases is the official statement in November that the government is VIII. The Soviet command and control of WHO's AIDS extending the length of unemployment benefits by six more Policy months. The Labor Minister stated on this occasion, "There IX. Why the Reagan administration has tolerated the is no royal road back to full employment." Indeed, this year, CDC cover·up of the AIDS pandemic a record number, 100,000, has been forced off unemploy­ X. The necessary public health program to fight AIDS ment rolls into governmentpublic works programs. In 1982, the number was 30,000. This comes suspiciously close to the $250.00. Order from: EIR News Service, P.O. Box difference between official unemployment levels for 1985 17390, Washington, D.C. 20041-0390. Order and 1986, suggesting the means by which the Bonn govern­ #85020 ment has "reduced unemployment for the first time since 1979."

18 Economics EIR December 19, 1986 went against the tide, and in the 1960s, created an entirely Shipping new transport system, which, for example, improved the U . S. flag carrying position from 21% of tonnage carried to 55% by the early 1970s, for example, on the strategic North Atlantic routes. This did not last long. In 1973, Kissinger's grain deal u. s. Lines parent with Moscow included a sweetheartarrangement which pro­ ceeded to destroyrates on world routes. Soviet vessels could company files Ch. 11 enter any U.S. port and charge any rate . The American industry, led by McLean, fought back with In late November, the giant American shipping company, improved technology and cost structures, and by the early McLean Industries, Inc., filed forChapter 11 protection un­ 1980s, had developed the lowest-cost container ships in the der the federal bankruptcy code in Manhattan, New York. world. U.S. Lines, with its development of mammoth con­ Cash flow problems, particularly with the operations of the tainer ships, and routes circling the globe, was capable of U.S. Lines division, one of the world's largest and best providing , on a unit cost basis, transportation at lower cost containershipping companies, forced the action. than foreign flaglin es, and with American seamen. McLeanannounced the suspensionof U.S. Lines' round­ However, outside the control and commitment of Mc­ the-world and trans-Atlantic services. A spokesman said that Lean and other patriotic shipping industrialists, are the ac­ 1,200 employees were laid off-about half the workforce. tions of the cartel commodity companies, who use and run Thecompany will lay up all the ships and lay off all person­ their own foreign fleets. In addition, the anti-growthpolicies nel . According to a Wall Street Journal report, the spokes­ of the International Monetary FundIWorld Bank have dras­ ' man said that the 12 U . S. Lines superfreighterswould deliver tically depressed all Western trade flows. All the "free mar­ their cargo and sail to U. S. ports;then "the banks will come ket" jargon in Washington is just a smokescreen for the way afterthem, and they'll do what they want with them." in which cartel monopoly shippers avoid Mclean and the few McLean's trans-Pacificand South American services will other U.S.-based, efficient services. Instead, they use flag go on as scheduled. U.S. Lines will continue to operate its preferences of national flag lines, and cargo routings con­ inland U.S. operations, including double-stack train service trolled by the commodity cartels on a worldwide basis. from coast to coast. The physical volume of world shipping tonnage has col­ In 1983, major banks financed the completion of the U . S. lapsed by an estimated 26% since about 1979. World ship­ Lines fleet of 12 jumbo container vessels. The company ping volume now is running at an annual level of 14 billion maintainedweekly sailings around the world. However, the ton-miles. profitability was undermined by depressed world shipping Under Chapter II, McLean Industries, Inc. has 120 days conditions, and the aversive cut-throat freight rates, aided to make a reorganization plan, during which time, creditors and abetted by policies of the State Department and collabo­ cannot foreclose on its assets. McLean had losses of $92 rating foreign cartel carriers, run principally from London, million in the third quarter of 1986, on revenue of $258 Moscow, and Switzerland. million; losses of $77 million in the second quarter on reve­ Company founder, Malcolm P. McLean, has named nue of $306 million; and losses of $7 1 million in the first Charles I. Hiltzheimer as president and chief executive offi­ quarteron revenue of $291 million. cer, to succeed McLean in these positions, to work on putting The I2-ship building program was done by Daewoo Ship­ the operations back in place. building and Heavy Machinery, Ltd. of South Korea. The Malcolm P. McLean is the pioneer of containerization, latest ship expansion cost $570 million. the greatest revolution in transportation since the invention Each ship is 4,200 TEUs (Trailer Equivalent Unit). Each of the steam engine. At 73, McLean is a living symbol of the carries 4,200 trailers. MUltiplying 4,200 by 20 feet, the av­ pioneers of American industry such as Andrew Carnegieand erage trailer length, gives 84,000 feet-more than 16 miles. Thomas Edison. He was born in North Carolina, where he Imagine a continuous 16-mile line of trailertru cks. If you've left school after third grade , pumped gas, and then went on ever sat at a railroad crossing, the average train in the old to create his own, giant international trucking and shipping days was about 80 cars-only one-half mile long. So, one fleet. He founded McLean Trucking and Sea-Land Service, ship's worth would be 35 times bigger than one railroadtrain a division ofCSX-the former Chesapeakeand Ohio (C&O) in the old days. That is the efficiency. and Baltimoreand Ohio (B&O) railways. For Sea-Land, McLean built the famous 33 knot contain­ In the last 250 years, the U.S. flag shipping industry has er ships-the SL 7 fleet, put in service in 1970, which set historically ascendedfo llowing a major war, but, very quick­ trans-Atlantic speedrecor ds. At the time, they werethe only ly, has been overtaken by foreign interests, working through Free World cargo ships that could outrun Soviet nuclear policy channels in Washington. However, Malcolm McLean submarines.

EIR December 19, 1986 Economics 19 sociation CAME, announced' that general demand for its products had fallen a full 30% in the month of October, and that 70% of its installed capacity was idle. Hiring in all sectors of the economy fell for the fifth consecutive month, and was to fall another 13.3% more in November. The col­ Argentine Church lapse in hiring, especially noticeable in construction, indus­ try, services, and among professionals and technicians, re­ backs labor's demand flectsthe degree of paralysis of the productive portions of the economy under the financial strangulation of the central bank by BenjaminCastro "mafia." The majority of business organizations in the country have declared themselves in varying degrees of rebellion On Dec. 3, the president of the Pastoral Commission on against government policy. TIle most striking case is that of SocialWorks of the Argentine Catholic Church, Monsignor the agricultural producer associations, which, in mid-No­ Italo Di Stefano, visited the offices ofArgent ina's powerful vember, broke relations with tbe governmentand stalked out labor federation, the CGT, to offer the Church's public sup­ of an emergency council convoked by President Alfonsin to port to the federation's mobilization in defense of Argentine hear their demands . ' economic sovereignty. The Alfonsin government has not limited itself to de­ During a two-hour meeting with CGT secretary-general stroyingthe private sector. On Nov. 28, Alfonsin announced Saul Ubaldini, Monsignor Di Stefano declared, "Anything his decision to launch a "reform" of the state apparatus, that helps to satisfy social necessities has our greatest sup­ including state sector companies. He proposed at the same port." Referring specifically to the CGT's economic pro­ time to begin to eliminate 26,000 state employees' jobs gram, which includes a call for moratorium on the nation's through a system of "voluntary retirement." Those who re­ $42 billion foreign debt, Di Stefano said, "We second, en­ fuse to accept such an offer of retirement will be placed for dorse, and supportthese demands, which in tum echo what one year in a "national labor exchange" from which the the leaders are hearing from their base." Di Stefano also "slimmed-down" state apparatus will allegedly pick and criticized the Alfonsin government for its failure to "apply choose new employees. Those not chosen, presumably the social justice according to humanist and Christian princi­ majority, will be tossed onto the unemployment scrapheap. ples." Alfonsin has also named as director of his State Company The Argentine labor movement, which has been one of Directorate one Enrique Olivera, a graduate of HarvardBusi­ the most aggressive on the continent in denouncing the sub­ ness School who cut his teeth working under the direction of ordination of national interests to the blackmail of the Inter­ Gianni Agnelli in the 1977 "restructuring" of the FIAT com­ national Monetary Fund and the international creditor banks , pany in Italy. is viewed as a model for nationalist sentiment across Ibero­ Olivera's immediate objective-in addition to "repriva­ America. tizing" the remaining state companies-is to create the con­ During Di Stefano's visit to the CGT offices, he extended ditions for handing over to foreign investors the 13 companies an invitation to Ubaldini to attend a "working meeting" with which constitute the most importantfo undation of Argentine Pope John Paul II when he visits the country next April. The economic sovereignty-oil, railroads, communications, pontifical visit to Argentina will take place just after the electricity, etc. Olivera will apply "business administration release of a special papal document addressing the crisis of criteria" to reduce costs through eliminating jobs and ceding the Third World foreign debt, a document which has already operations and projects to private investment. Olivera has raised tremendous expectation among debtors and creditors already declared his intention to eliminate from state control alike. any company "related to the market sector" and to generate a wage system for public employees which is "self-financing." 'Black October' triggers revolt As has already been made public in Argentina, the main During early November, not only Argentine labor, but demand of the international creditors of Argentina, headed also industrialists and agricultural producers were shocked by Citibank, is for 100% "capitalization" of the country's by official figures released on the economy for the preceding foreign debt. That is, what the bankers want is that each month. "Black October," as it was immediately dubbed, not dollar of the foreign debt-be it public or private sector only gave testimony to the deep recession in whichthe coun­ debt-be transformed into a dollar's worth of stocks in the tryfinds itself, but exposedthe intent of the Radicalgovern­ debtor company. Should this plan succeed, the interest pay­ ment of Raul Alfonsin to thoroughly eradicate what remains ments alone thatthe country shells out each year, to the tune of Argentine national sovereignty. of $5 billion, will enable the banks to buy up the Argentine For example, the retail-wholesale sector, through its as- nation piecemeal.

20 Economics EIR December 19, 1986 Report from Rio by Lorenzo Carrasco

Brazil 'integrates' Argentina Brazilians who die of hunger in the Ford and Volkswagen merge regional op erations-fo r cutting sugar-cane fields, and the estimated $10 billion in government subsidies to costs, notfor genuine development. promote inefficient alcohol-powered automobiles. But the collapse of Brasilinvest last year hardly touched them, and now T he Argentine government of Raul paid to Brazilian workers-the secret they intend to bring several Brasilin­ Alfonsfn and the Brazilian one of Jose of that country's "export miracle." The vest directors into Autolatina. Auto­ Sarney have signed an "integration" Brazilian scale is used to pressure Ar­ latina's leaders do not hide that the agreement, and Uruguay's Julio Mar­ gentine workers to reduce their wage objective of the operation is to reduce fa Sanguinetti has tagged along. The demands. production costs by using "compara­ integration protocols, signed by the This is how both countries expect tive advantages," which means reduc­ three countries and ratified Dec . to recover the million in losses ing wage levels, especially of Argen- 10 $164 . while Alfonsfn visited Brazil, permit­ they sustained during the past year. tine workers . ted the auto giants to integrate their Ford and VW created such "losses" by As Sauer put it, "I don't think we regional operations. manipulating their international ac­ will reduceproduction in Brazil. . . . The deal continues to win ap­ counts ·to mock tax collectors, while Autolatina will not be a negative fac­ plause from the automotive multina­ remitting hundreds of millions of dol­ tor on the labor force. " tionalsand to arouse false hopesamong lars out of the region. The "integra­ But the Argentine situation is dif­ genuine industrialists in the three tion" pact will facilitate such fraudu­ ferent. Sauer indicated, "Certain mea­ ' countries, for whom the accord seems lent practices, broadening the exclu­ sures will be needed there to rational­ to promise relief from International sive fiscal paradise they now hold. ize work. This rationalization is a dai­ Monetary Fund (IMF) austerity poli­ Autolatina will be chaired by ly task of industry, because its num­ cies. But such economic integration in Wolfgang Sauer, the currentpresident ber-one obligation is to cut costs .... the framework of the rotten interna­ of VW Brazil, and managed by Wayne In Argentina, we will coordinate and tional financial system is nothing less Booker, the Ford Brazil president. rationalize . . . to avoid the negative than a cooperative effort to swim to­ Sauer's credentials leave much to be effects of diminishing the number of gether in a swamp filled with croco­ desired. Last year, he was involved in employees." In other words, a good diles. financial scandals for issuing moun­ part of VW's nearly 10,000Argentine The most recent event is the merg­ tains of commercial paper with no autoworkers will be fired. er of Volkswagen of Argentina with backing, which led to the bankruptcy Those responsible for this false in­ Ford Motor Company of Brazil and of Brasilinvest investment bank, tegration are governmentofficials ,'t he Argentina. The new company, bap­ owned by the shady Mario Garnero, direct heirs of the "developmentism" tized Autolatina, will be the world's an intimate of David Rockefeller. hoax which neutralized efforts for full- . eleventh largest assembler, and the Along with Sauer on the Brasilinvest fledged integration based on protect­ largest by far in lbero-America, with board were George Shultz, and former ing the development of a capital-goods the capacity to produce 900,000 ve­ U.S. Treasury Secretary William Si­ industry. That's what Juan Domingo hicles per year in its 15 plants . It could mon, and several Ford executives such Per6n sought in Argentina and Getulio achieve annual sales of $4 billion, as Mauro Salles and Newton Chapar­ Vargas in Brazil. Once they were through exports and its 1 ,500dealers ini. overthrown, their successors, Jusce­ in both countries. Ford and VW now Before the discovery of the Brasi­ lino Kubitschek and Arturo Frondizi hold 60%of the Brazilian auto market linvest fraud, all those involved in the built industry around "import substi­ and 55% of Argentine truck sales. Autolatina group had made illicit for­ tution," promoting auto transport and Without investing a cent in new tunes with Brazil's "Proalcol" pro­ consumer-goods industries. They fos­ physical capacity, the companies ex­ gram promoted by Mario Garnero. tered the auto giants which today , pect large profits by using the "com­ Brazil's alcohol program is profiting again, are encouraged by the "devel­ parative advantages" of both coun­ thanks to the relative advantages of opmentist" inventors of phony inte­ tries, especially the miserable wages using the slave labor of millions of gration.

. EIR December 19, 1986 Economics 21 Domestic Credit by David Goldman

'Consensus fo recast' on the Titanic sets the stage for an escalation in the The nation's business economists predict growth, but they industry price war, and a contest among steel firms to achieve bank­ themselves fa ce unemployment. ruptcy-reoliganization or other forms of restructuring, on relatively more fa­ vorable terms. Major steelmakers' incoming or­ U PI, Dec . 8: "The consensus fore­ at the 16-month-old Detroit-Ham­ ders for the week ended Oct. 25 were cast among 4,000of the nation's lead­ tramck luxury-car plant, starting Feb. equivalent .to 60% of capacity, near ing business economists is for slightly 2, cutting output by 50%. Starting Jan. the 62% average order rate during the faster economic growth in 1987, fol­ 5, hourly production will be down al­ preceding five weeks. Analysts attrib­ lowed in the next year or two by reces­ most 12% at two other plants at Orion ute the continued weak order level to sion, according to a survey released Township, Michigan, and Wentz­ the slow liquidation of large invento­ Monday . A quarterly poll of members ville, Missouri. Sales of some of the ries . of the National Association of Busi­ . cars at these three plants are down as That translates into an output level ness Economists produced a consen­ much as 60% from 1985. The models corresponding, again, to the worst of sus forecast of 2.5% growth in the affected are among GM's most prof­ the 1980 downturn. gross national product this year and itable cars. The news follows the an­ In summary, the most basic of 2.8% expansion next year." nouncement of 1,900 layoffs last basic industries, namely steel, has The following day, the Washing­ week. Overall, GM has a 100-day ratcheted down to a level 25% below ton Post reported that business econ­ supply of cars; a 60-day supply is con­ last year's� That is explained by the omists were u�ually the first victims sidered normal. GM said its policy is fact that commercial construction, of "staff reductions" among firms fac­ to cut production rather than resort to particularly following the passage of ing urgent "restructuring." Not until incentives. The pared-down Detroit­ the tax reform bill, is down by roughly the majority of the members of the Hamtramck facility is one of GM's 30% over the previous year's level, National Association of Business newest and most expensive. and by the auto industry 's miserable Economists are unemployed, it ap­ On Dec. 4, MCI announced lay­ situation. GM's current wave of lay­ pears, will the association project any­ offs of 2,500 workers, or about 15% offs , which amount to 36,000 an­ thing else. of its total workforce of 16,000.MCI , nounced during the past four weeks, Manufactured goods orders in Oc­ hailed as the rising star of the high­ occurs at a time when American car­ tober were down 3.6%, the worst fall tech service sector, is suffering badly makers' ou�put is already down by 8% since May 1980, i.e., the worst of the in the long-distance marketplace, below the 1985 level. However, the 1980-81 ratchet-collapse. Much of the where rates have dropped 20% since elimination of incentives for auto sales decline was in defense capital goods, the 1984 breakup of AT&T. is likely to tum this into a margin of which were down 42%. Otherwise, In the long-suffering steel sector, decline by at least as much between orders fell 1.8%, the biggest drop since the projected resolution of the USX 1986 and 1987 . last March. Durable manufactured strike, the longest in U. S. history, will The one positive factor for the goods were down 5.1%. In heavy apparently bring no relief to the indus­ economy, perversely, is the continued manufacturing, transport equipment try . On the contrary , the USX strike expansion of the trade deficit. Despit� was down 9.8%, mostly due to a de­ managed to take sufficient steel off the the administration's predictions of im­ cline in defense aircraft and parts or­ market to postpone a collapse of steel provement, the deficit (on a balance­ ders. prices, which had otherwise begun last of-payments basis) rose to $37.67 bil­ The list of firms undertaking ma­ June. lion during the third quarter, up from jor restructuring, i.e., shutdowns, has LTV Steel's bankruptcy will, ac­ $35.67 billion. Net imports provide a meanwhile expanded, with a special cording to analysts, reduce the firm's subsidy for U.S. output; when the vengeance in basic-industry sectors ; pre-tax cost by $85 per ton of crude weak dollar finally forces their de­ On Dec. 4, GM announced anoth­ s�l, bringing its pre-tax costs to more cline, because they will rise steeply in er 4,500layof fs to cut inventories. This than $50 per ton below those of its price, matters will tum. much worse includes knocking out one work shift next-most-efficient competitor. That very quickly. •

22 Economics EIR December 19, 1986 Agriculture by Marcia Merry

Food disputes in a world of hunger existing levels of food output below Trade "experts" like to refe r to a decline in "demand growth," "effective demand"-the imposed in­ ability of peoples to obtain food . Over meaning that nations cannot affo rd to produce or import fo od. the 1986 period, incredible measures were enacted to reduce food produc­ tion in the world's most highly devel­ oped farm products exporting na­ One week before the scheduled, provisioning the livestock needed to tions-the United States and the Eu­ annual trade talks between the United supply animal protein to the diet. In ropean Community. States and the European Community, addition, another billion tons of cer­ The European Community has en­ the U.S. Agriculture Department re­ eals-for a total of 4 billion world­ acted a milk output quota-with pen­ leased world food statistics at its 63rd wide-should be produced for car­ alties for violation, and a tax on "ex­ annual "Outlook" conference in ryover stocks, and to make up for loss­ cess" grain output, called a "producer Washington, D.C. The rhetoric was es in storage, shipping, and process­ co-responsibility" levy. upbeat, but the figures were grim. Said ing. The United States has implement­ Richard Goldberg, deputy undersec­ A person requires an estimated 24 ed the Dairy Herd Termination pro­ retary for international affairs and bushels of grain each year for direct gram, in which whole herds are elim­ commodity programs, on Dec. 3, and indirectconsumption . Multiply the inated permanently. Farmers are also "Agriculture export trade is not going world's 5 billion people times 24 coercedinto idling record amountsof to be conducted in a world of scarcity, bushels (at about 50 pounds of grain a land to gain cashftow from govern­ but in a world of surpluses." He's bushel), and the minimum world grain ment programs. lying. output objective of 3 billion tons is In addition to these measures to World per capita availability of calculated. directly decrease production, unprec­ cereals, meats , and necessities is de­ Total world cereals production in edented measures have been intro­ creasing markedly, while the most 1986, relative to population, works out duced to give over to food cartel con­ productive agricultural sectors of the to a little over 14 bushels per person. trol huge quantities of valuable food­ world-North America and Western In addition, according to best esti­ stocks, at the expense of the general Europe-are engaged in vicious trade mates, only 1.61394 billion tons, not public and farmers . For example, in war, and attempts to decrease their the full harvest, will go for consump­ the United States, the new program farm output. Whatever the outcome of tion. This brings down the bushels per called the Payment-in-Kind generic the combination of ongoing GAIT personto well under 14. World grain­ crop certificate plan, allows cartels to (General Agreement on Tariffs and stocks are piling up, unused and de­ get what they want, when they want, Trade) meetings, and North Atlantic teriorating, because of the decline in from government stocks at cheap food trade talks, the reality of world world food trade. So-called world prices. food shortages and mass starvation ending stocks this year will be .38675 In Europe, a similar swindle, un­ must be the measuring rod for farm billion metric tons, up from .25585 der a different name, has allowed car­ and food policies in 1987. billion metric tons, in the face of star­ tel brokers to send huge quantities of The following is a summary of the vation. meat and other foodstuffs to the Soviet statistics made available at the Out­ The trade "experts"like to refer to Union, at the cost of the lives of mil­ look conference. this process as a decline in "demand lions of people in Africa, to whom that As of year-end, the figures for 1986 growth." What they mean is that whole food would have been exported under world grain production showed a slight nations cannot afford either to pro­ a rational international policy. upward trend, from 1.64407 billion duce their food , or to importit-under As of year-end, the line-up of pro­ metric tons in 1984, up to an estimated the monetary conditions of the Inter­ posed "alternatives" to this mess, to 1.64697 billion metric tons for 1986. ational Monetary Fund and related be introduced into the l00thCongress Measured against the nutrition needs banks and food cartelcompanie s. and EC deliberations in 1987, is de­ oftoday's 5 billion people in the world, According to these "experts," there signed to make things worse. It is all this amounts to about half of what is is nothing much to be done about the based on the assumption that nothing actually required-3 billion tons for starvation, and the response to the sit­ can or should be done about the IMF direct consumption of cereals and for uation should be to drastically reduce system.

EIR December 19, 1986 Economics 23 Medicine by John Grauerholz. M.D.

New technology for cancer detection spectrum of plasma lipoproteins The new NMR technique seems to be on the way to becoming a (combinations of fat and protein) as well as a number of small molecules reliable test to detect the presence of cancers. which are present in high concentra­ tions. Sorting through these different spectra,they settled on the methyl and methylene groups of the lipids of the Medicalscientists have long sought diseased cells such as cancer. relax plasma lipoproteins as the variable of a blood test to detect the presence of much more slowly. interest. They looked at these spectra cancer. During this time, a numberof The use of NMR to detect cancer in 331 patients. These consisted of pa­ different chemicals have been found was first proposed in 1971 by Dr. R. tients with untreatedcancers , current­ to beassociated with particulartumors Damadian, who pioneered the devel­ ly or previouslyundergoing treatment and have been utilized primarily to opment of large NMR scanners capa­ for cancer, with benign tumors, preg­ evaluate the treatment and manage­ ble of scanning an entire body and de­ nant women , and two control groups. ment of already diagnosed cancers. tecting cancers in a manner analogous The results showed that this tech­ In the Nov. 27, 1986NewEngiand to CAT scanners, but with much better nique reliably distinguished patients Journal 0/ Medicine. scientists at the resolution. This work has been ex­ with malignant cancers from normal Charles A. Dana Research Institute, panded by other workers , such as Dr. controls andpatients with non-cancer­ Beth Israel Hospital, and the Harvard James Frazer in Texas, who have used ous disease, as well as patients with Medical School, report on the detec­ variations on this technique to not only benign tumors. However. pregnant tion of malignant tumors of various detect, but also treat some cancers. patients and patients with benignpros­ types by use of a technique called The high cost, and limited avail­ tatic hyperplasiahad readings consist­ water-suppressed proton nuclear ability of NMR scanners, have so far ent with the presence of malignant tu­ magnetic resonance (NMR) spectros­ precludedthe use ofNMR as a screen­ mors . The prostatic hyperplasia cases copy of plasma. ing test. However the technique de­ may indeed have had undetected can­ Unlike other blood tests, such as veloped at Harvard uses a smaller in­ cers, not that uncommon in such pa­ carcinoembryonic antigen, beta-hu­ strumentto analyze a sample of blood tients and often detected at autopsy man chorionic gonadotropin, and al­ plasma, rather than a whole patient. after the patient has died from some pha-fetoprotein which measure the Researchers had noticed increased other cause. presence of chemicals produced by relaxation times in the serum and un­ The reactions in the pregnant specific tumors, this technique ap­ involved organs of animals with ma­ women are interesting. They indicate pears to measure the body 's response lignant tumors, as well as small but that what is being detected is a reac­ to the presence of cancer of any type statistically significant increases in the tion on thepart of thehost to the growth and to clearly discriminate between serum of patients with malignant tu­ and not a tumor product. cancer-bearing and non-cancer-bear­ mors . These differences were small These preliminary results indicate ing patients. and did not distinguish between be­ that water-suppressed proton NMR ProtonNMR is a technique for de­ nign and malignant tumors . They were spectroscopy of plasma may indeed termining the degree of order of cells useless for diagnosis or prognosis. provide us with a highly accurate test or molecules. This is done by polar­ Since the relaxation time of plas­ to detect many different cancers. What izing hydrogen atoms (protons) in a ma is a composite of the protons of is more significant are the potential strong magnetic field and then mea­ water and various other molecules in breakthroughsin our understanding of suring the amount of time required for the plasma, the researchersdecided to the general phenomena of cancer as a them to resume their normal posi­ examine NMR spectra of protons oth­ disease process. It is in the area of the tions. This "relaxationtime" is corre­ er than water in the plasma of patients spectral analysis ofliving systems and lated to the degree of organization of withcancer and in the plasma of con­ not in the linear reductionistapproach the molecules in question. Highly or­ trol groups. They did this by utilizing of molecularbiology that we will make ganized molecules, and healthy cells, the capability of modem NMR spec­ the fundamental breakthroughs nec­ rapidly return to their resting state, trometers to suppressthe resonanceof essary to conquer cancer, AIDS . and whereas less ordered molecules, and water protons. This leaves mainly the aging.

24 Economics EIR December 19, 1986 Banking by David Goldman

The first cracks in securitization profit, because a large proportion of The $17 billion floating-rate note market could light the fu se fo r their existing loan-portfolios died. trillion in off-balance-sheet liabilities. What they could not earnin inter­ $3 est from dead loans, the banks took in by issuing loan guarantees and similar commitments, in return for up-front fees. The volume of loan guarantees in the United States has grown from Trading was suspended on almost land rules" that allows banks to use almost nothing, to $500 billion in $17 billion of floating-rate notes the instruments as primary capital. 1985, as a result. (FRNs) in London on Dec . 4. One "The first hint you can't sell, and peo­ In effect, the banks expanded their among many forms of "creative secu­ ple rush to get out." The present col­ liabilities in return for one-shot cur­ rities" which have proliferated during lapse of confidence, according to re­ rent income, which is the most dan­ the past severalyears , the affected area ports , was triggered by selling from gerous and irresponsible thing banks involves so-called "Perpetual FRNs ," nervous Japanese banks. can do. For a bank, a loan guarantee a device through which the major The collapse of the FRN market is no less a liability than a loan; if the banks have increased their capital. represents a crack in a $3 trillion dam. borrower fails, the bank will have to Faced with a trillion dollars of bad It may seem astounding that banks pay off the loan. Third World debt, and hundreds of raised billions of dollars in new capi­ One particularly nasty feature of billions of dollars of bad oil, commod­ tal, by issuing notes which pay a frac­ the "off-balance-sheet operations" is ity, shipping, real estate, and related tion less than the daily quoted rate for that they have permitted banks to sell loans , the major banks issued capital offshore deposits in London. off their best-performing loans in the notes whose interest rate changes with Since the banks themselves are the form of securities, raising money in the market, but whose capital will major buyers of such paper, the bank­ the short-term, while leaving a higher never be repaid-hence, "perpetual" ing system appears to have dealt with proportion of bad loans in their port­ notes . a threat to its solvency by taking in its folios. The run against this offshore bank own laundry . In particular, the New York banks paper known as FRNs has not yet af­ However, the FRN "confidence have sold off their most dependable fected the banks' deposits . However, game," as insiders call it, constitutes loans. According to London financial big international money, reportedly led a mere fraction of a $3 trillion inter­ community sources, there is growing by the Japanese banks, has unloaded national bubble created by the major alarm over the process of "securitiza­ paper issued by some of the world's banks . The commercial banks issued tion" and growth of "off-balance­ top · international institutions, fearing $3 billion worth of guarantees for all sheet" lending through which, in­ that "it may never be paid back," the kinds of securities, agreeing to bear creasingly since the outbreak of the London Financial Times warned Dec . the risk of default, interest-rate debt crisis in 1982, major money-cen­ 4. changes, or currency shifts. Virtually ter banks have technically improved London sources call the market all the issuance of securities in the past book profits to conceal loan losses. collapse the worst-ever crisis of con­ three years has depended upon such The banks, hurting badly for cur­ fidence in the 20-year-old Eurobond guarantees. rent income, accepted an up-front fee , market, the $2oo-billion-a-year off­ International lending collapsed in exchange for such guarantees. shore pool which tUrns international between 1982 and 1985, from over At the same time, they loaded up hot money into "legitimate" invest­ $100 billion per year to barely $10 their portfolios with securities issued ments. Bankers warnthat the suspen­ billion last year. It collapsed because on the strength of guarantees provided sion of trading of bankers' capital notes the banks' existing intemational loans, by other commercial banks, like the could damage the liquidity of major to Third World borrowers and others, "perpetual FRNs" whose market sank British-based banks. became worthless. into the ground. "Perpetual FRNs are a bit of a con­ The banks could not earn suffi­ Thebanks' own portfolios are now fidence game," a financial insider said. cient income to pay interest on their vulnerable to a collapse of the paper "They are an evasion of Bank of Eng- existing deposits, much less show a pyramid they built themselves.

EIR December 19, 1986 Economics 25 Business Briefs

Economic Aid On Dec. 4, Mantilla had announced that, the riot dlj.mage is not yet known, but one Reagan, cabinet in 1987, Peru will run joint operations with companY " the National Imports and Exports its neighbors to erradicate drug trafficking Corp. , lost two employees, 21 shops, and meet with Mobutu along their common borders . "We have be­ property worth $6.5 million. He appealed to gun a historic battle process along with Col­ law-abiding Zambians to assist security President Mobutu Sese Sekou of Zaire made ombia and Ecuador, a country which has no forces as they track down looters and rioters. an urgent trip to Washington in early De­ experience but is getting prepared. We hope cember to seek economic relief. He met with that next year could bring unity witb Brazil President Reagan and most leaders of Rea­ and Colombia for joint actions, because we gan's cabinet. already have preliminary agreements." Development President Mobutu' s main target was the Mantilla said the U. S. government con­ IMF and World Bank , whose austerity pol­ tinues to give economic support for the Peru's Garcia icies are destroying his country . Th\! IMF, . struggle .against drugs and the England, is. , which has been "supervising" the Zaire committed to repairing one plane and do­ appea:ts' to 'industrialists economy for the last four years , is now ex­ nating another. During the first quarter, air­ tracting 54% of the nation's entire budget craft and valuable logistical equipment will President Alan Garcia announced on Dec . 3 for the payment of foreign debt. arrive from Canada and Germany . a plan for coordinating industrial invest­ Mobutu comes with a mandate from his ments to maximize development in his Central Committee, which earlier this year country . recommended that Zaire adopt the "Peruvi­ "We have begun a harmonizing process an solution"-Iimiting debt payments to a with business so that profits made with the fixed percentage of export income ; Austerity reactivation of 1986 are invested in the areas U.S. senior officials told Mobutu that of interest to national development. For ex­ under Gramm-Rudman constraints, the Zambian President ample, food , textiles and in the provinces." United States has no new foreign assistance cancels price increase Garcia has held weekly meetings with to offer Zaire. industrial .leaders to work out investment policies. Next year, those of each sector will Zambian President Kenneth Kaunda can­ decide where increased capacity is needed. celed on Dec . II the increases in prices for Income invested in those areas will be tax­ high-grade com meal , following four days free , if some fresh capital equal to 30% of War on Drugs of riots in the northern copperbelt in which the project is also invested. at least people died. 11 Earlier, on Nov . 16, Garcia had told a Times, 'Operation Condor' According to the London "The business convention, "An industrialist is not ...price rises were dictated, in effect, not begins in Peru a speculator. . . . An industrialist is some­ by the Zambian government, but by the In­ one who takesrisks for himself and for Peru . " ternationalMonetary Fund as a condition for Augustin Mantilla, Peru's vice minister of extending further loans ." the interior, announced on Dec . 9 the begin­ In a televised speech. Kaunda said the ning of "Operation Condor 5," the latest price would revert to its previous level im­ Agriculture phase in Peru's war on drugs that began in mediately, and declared com milling a stra­ 1985. tegic industry in which only the government 'Free Europe In the first 24 hours of assault on the and cQOperatives can participate . cocaine paste producing center of Uchiza, He said that the reintroduction of gov­ needs free farmers' 730 kilos of basic paste were seized and ernment subsidies on com meal-the staple three enormous decanting pits were de­ diet of Zambia's population-would divert Two hundred farmers and leaders of farm­ stroyed. Mantilla said, "The operation be­ money that Zambia should spend on devel­ ers' association from Europe , the United gan Monday [Dec . 8] in the midst of the opment of public services. "It means the States, and lbero-America gathered in Ob­ jungle, especially in Uchiza, and it is ex­ economy will remain static ." ernburg , West Germany , for a Schiller In­ pected it will end in the third week of De­ According to the London Financial stitute Agr;iculturalCommi ssion meeting on cember. I am confident this new attack on Times on Dec . 12, Kaunda's reversal "calls Dec . 6 and 7. narcoticstraffic will be successful." into question the future of the country's re­ The title of the conference, "Free Eu­ He said that 130 kilos were found on a lations with the International Monetary Fund, rope Needs Free Farmers ," suggested the plane shot down and its two crew members which has been backing an economic aus­ direction of the solution: to return to the killed. In another raid, 300kilos of refined terity program. " tradition of independent farmers, and stop cocaine were seized. President Kaunda said that the extent of .the process leading to medieval conditions

26 Economics EIR December 19, 1986 Briefly

• WEST GERMANY will resolve outstanding debt problems with Peru in February , its ambassador in Lima stated on Dec . 7. He said the debt "is whereby fanners become serfs of banks or The Egyptian President stressed that in not critical and we are trying to cartels. the last 12 months, the most important dis­ achieve some remedy for this situa­ Uwe Friesecke and Rosa Tennenbaum agreement had been "the confrontation be­ tion; I am proud that this is the spirit of the Schiller Institute in Germany showed tween Egypt and the United States over the in which the case is being handled." that the situation of the German fanner is as Achille Lauro affair." On Iran: "I could not The ambassador said, "We seek to bad as his AmeriCan coiulterpait's. They believe it when I heard it. This initiative has give all possible help in fighting ter­ concentrated on demonstratingthat the world destroyed the credibility of the U. S., if not rorism and drugs." agricultural crisis is a crisis of underprod­ worldwide, at least in the Arab world. I have uction. sent messages to Washington to express my BOLIVIA Fortunato Tirelli, general secretary of views, but obviously in Washington, they • appealed for $300 the Italian Cattle Breeders Association in have other problems." million from the World Bank to per­ Rome, showed that the EC , by forcing farm­ suade some 70,000 families growing ers to destroy products or kill cattle if they 123 ,500acres of coca-leaf to switch exceed "quotas," has created malnutrition to cocoa and coffee, its planning min­ in Italy. European Economy ister Gonzalo Sanchez Lozada told a From France, Marc Gaulandeau, broth­ news conference in Paris on Dec . 4. er of the president of the French Agricultural Economist sees He estimated Bolivian income from cocaineexports at $1. 8 to $2.5 billion Association, addressed the conference on great depression coming how Moscow profits from the bankruptcies annually . that EC quotas have caused in France, thanks also to "red billionaire" Doumeng , a friend "We are facing the second big crisis. Today • MEXICO has 50 to 100 times the of Gorbachov and the French Communists, in Europe an average unemployment exists perviously reported number of AIDS and France's biggest meat distributor, who similar to that in '29. The European average cases, Health Minister Guillermo sells the Soviets butter and meat at dumping is II%. In the '50s and '60s in these same Soberon admitted on Dec . 4. Until prices. countries, the unemployment average was the press conference, he had insisted Juan Rebaza, chairman of Peru 's state 2% . In Italy it was 5%," according to econ­ that there are only 249 cases of AIDS fishing company Pesca Peru and a founder omist Franco Modigliani of MIT, speaking in Mexico. Now he admits that for of the Schiller Institute Trade-Union Com­ at a conference in La Sapienza University of every one of those 249 reported cases mission, told of his country's fight against Rome in mid-December. Modigliani enjoys there are "between 50 and 100 other terrorismand drugs. the dubious distinction of having won the people infected." Nobel Prizefor economics in 1985. He pointed out the serious consequences • NIGERIAN oil minister Rilwanu that such rates of unemployment have on a Lukrnan, OPEC's president, told Debt nation: "We must consider how much in­ OPEC's ongoing meeting that "some come is jeopardized. An unemployment rate individuals jubilating at the prospects Egyptian President puts of 10% causes in a country an annual loss of of prolonged low oil prices and of the 15-20% of the national income . And it de­ collapse of OPEC , are suddenly sup­ nation before debt creases the tax-revenues creating damage to porting the idea of an oil import fee the State ....Now in Italy the situation is to protect the United States oil indus­ "The political stabilityof Egypt is more im­ disastrous: One-third of the people under 25 try , conveniently ignoring the fact that portant than the pretensions of the IMF," are unemployed. . .. If the economic such a development would be against Egyptian President Hosni Mubarak declared growth-rate remains 2.5-3% ...till 1990 free trade and the free market which in an interview with the French daily news­ Europe will have to live with II% unem­ America champions . " paperLe Monde in mid-December. ployment. Only for a short period is such a "What do they want?" he asked. "To percentage tolerable ." • CHASE MANHATTAN and provoke riots? Their policy was implement­ Modigliani blamed the situation on the Merrill Lynch are both having finan­ ed in Morocco; it provoked riots. The same United States: "The big fault is that of Pres­ cial troubles. Chase Manhattan, the in Tunisia." ident Reagan who pushed up the U.S. defi­ bank of the Trilateral Commission's Mubarak also blasted the United States, cit." Modigliani proposed a moderation of David Rockefeller and Henry Kissin­ first on economic policy: "I get furious at economic requests from workers and em­ ger, is undergoing a "world-wide re­ those who are aggravating the conditions of ployees, concluding with a jab at the trade structuring and cost reduction ef­ my people. If you give me $800 million of unions: "To ask, as the Italian trade unions fort ," according to the Wall St. Jour­ economic aid and take from me $600million are doing, a 7% wage increase, is not ac­ nal-Europe of Dec . 10. Chase has to pay theinterest on the military debt, what ceptable, and is unjust toward those who closed 50 New York City branches. does thatreally mean?" have no wor k."

EIR December 19, 1986 Economics 27 ITillScience &: Technology

Aerospace production: a shadow of the 19605

As one industry source told EIR's MarshaFree man and Robert Gallagher, ifcur re nt trendspr evail, the industry has Jive years to go blifore it's through. "

It will come as a surprise to most readers, that even aerospace same period. and defense industries have not fared well during the Reagan The state of the production Of civilian transports , military administration "economic recovery. " The American aircraft aircraft, and helicopters indicates the preparedness of the industry has undergone a collapse over the past decade that aerospace industry to meet a national emergency or mobilize seriously weakens our ability to provide for an adequate for an ambitious space program. Civilian transport produc­ defense, and undermines much of the infrastructure and re­ tion represents the nation's military airlift capability in re­ search-and-development capability relevant to a program for serve, as the merchant marine before World War II repre­ the colonization of the Moon and Mars . sented our sealift capability at that time. Today, however, The condition of aircraft production is a general barom­ there are only two companies left in civilian transport pro­ eter for the state of the nation's aerospace-defense industry. duction, Boeing and McDonnell Douglas . Aerospace-defense has been the science driver for the Amer­ ican economy since World War II. Every sector of the do­ mestic economy has been improved by research and devel­ opment carried out by the industry and sponsored by the FIGURE 1 National Aeronautics and Space Administration (NASA) and Civilian transport production Units the military services. The capability to carry out the Strategic Defense Initia­ 800 tive, build an aerospace plane , orbit a space station, return to the Moon, and colonize Mars, rests entirely with aerospace­ defense. For example, Rockwell International has used the same facility in California to assemble both Space Shuttle orbiters and B-IB bombers . Since 1968 the production of civilian transports used by commercial airlines, has fallen 60% from 702 in that year to 278 in 1985 (see Figure 1). The production of military air­ craft is down 48% since 1975, from 1,779 aircraft in that year, to 930 in 1984 (see Figure 2). Since 1980, production 72%, of helicopters for nonmilitary uses has fallen from Production of civilian air transports fo r use by airliners has 1,366 to 376 in 1984. Worker productivity has stagnated in collapsed about 60%since 1968. Thefleet of civilian transports is some areas of production, and collapsed in others, in the the basis of our military airlift capability in reserve.

28 Science & Technology EIR December 19. 1986 A technician at United Technologies' Hamilton Standard division inspects work on a propeller component. United Technologies has announced plans to lay off 11,000 of its 188,000 workforce by the end of 1987, as part of a "corporate restructuring program ."

Civilian helicopters are produced largely by the same 2). To rejuvenate America's military aircraft fleetto at least companies that produce the military helicopters key to the the level of Russia requires 5,500new craft. defense of Europe: Bell, Hughes, and Sikorsky. Overall, since 1975, total U.S. aircraft production has A conservative estimate based on a comparison of U. S. collapsed 77% from 17,030 aircraft to 3,929 in 1984 (see and Soviet military forces shows that America has a deficit Figure 3). Much of this fall-off was due to the collapse of in military aircraft of at least 5,500 craft. Although Russia production of general aviation aircraft, small recreational and has only about 1,900 more aircraft than the United States, executive airplanes, such as the Piper Cub or Cessna. The 62% of their fleethas been built since 1975, whereas for the plant and equipment used in production of these craft, is not United States only 27% is that new (see Table 1 and Table relevant to our mobilization capability. The deployment of military aircraft is especiallyrequired by the Strategic Defense Initiative. One arm of the SDI pro­ gram known now as the Aerospace Defense Initiative, in­ FIGURE 2 volves the development of high-altitude aircraft armed with U.S. production of militarily significant directed-energy weapons or relay optics, to attack lower­ aircraft altitude enemy bombers, fighters, helicopters, cruise mis­ Number of planes 10.000 siles, and short-range ballistic missiles in their boost phase. Other SDI aircraftwill beequipped with laser radar and other 9.000 sensing equipment. 8.000 From 1958 to 1968, aircraft industry productivity mea­ 7.000 sured in aircraft per production worker per year, generally 6.000 rose at an exponential rate (see Figure 4). Since then produc­ 5.000 tivity in civil transport production has fluctuated between

4.000 about 30 and 55 planes per 10,000 employees (see Figure

3.000 5a-b). Productivity in civilian and military helicopter produc­ 2.000 tion has collapsed 60%from 57 per 1,000employees in 1975 1.000 to 20 in 1984 (see Figure 6) . In the same decade, military o production fell faster than civilian: 60%versus 56%. 1953 58 53 80 82 83 Overall, industry productivity fe ll 78% over that same The production of militarily significant aircraft has fa llen by one-halfsince 1975. These aircraft include military aircraft period, from 63 aircraft produced per thousand production proper, civilian air transports, and helicopters fo r civilian uses . workers in 1975 to 14 in 1984 (see Figure 4). Most of this

EIR December 19, 1986 Science & Technology 29 TABLE 1 TABLE 2 Soviet and U.S. military aircraft newer than Total U.S. and Soviet m litary aircraft forces, 10 years old, deployed 1975-84 1984

U.S.S.R. U.S. U.S.S.R.lU.S. U.S.S.R. U.S. U.S.S. R.lU.S.

Heavyand medium bombers 148 0 148 Heavy and medium bombers 303 297 6 Interceptors 575 36 539 Interceptors 1,210 282 928 Strategic surveillance 5 0 25 Strategic surveillance 14 45 -31

Total land-based tactical 5,070 2,041 3,029 Total land-based tactical 7,418 4,787 2,631 Fighter/attack 3,955 1,362 2,593 Fighter/attack 5,460 2,900 2,560 Theater bombers 0 0 0 Theater bombers 423 198 225 Reconnaissance/surveillance 285 37 248 Reconnaissance/surveillance 585 292 293 Helicopter gunships 830 642 188 Helicopter gunships 950 1,397 -447

Total Naval 455 390 65 Total naval aircraft 1,085 1,295 -210 ASW 200 99 101 ASW 480 508 -208 Carrier-based (50) (99) Carrier-based 170 296 -126 Shore· based (150) (0) Shore·based 310 212 98 Other carrier·based 60 291 -231 Other carrier-based 60 787 -727 Other shore-based 195 0 195 Other shore· based 545 0 545

Military airlift Military airlift Strategic 240 259 -19 Strategic 305 329 -24 Tactical 140 80 60 Tactical 525 520 5 572 1,728 Helicopters 2,300 Helicopters 3,650 5,098 -1,448

Total 8,933 3,408 5,525 Total aircraft 14,510 12,653 1,857

Percent total aircraft 62 27

Source: John M. Collins, u.S.-Soviet Military Balance 1980-1985, Pergamon Brassey's, Washington, 1985 Source: John M. Collins, U.S.-Soviet Military Balance 1980-1985, Pergamon Brassey's, Washington, 1985

FIGURE 3

Total aircraft production FIGURE 4 Number of planes Total aircraft per 1,000 production workers 20.000

10.000

8,000

6,000

4,000

2,000 73 75 77 80

o Aircraft produced per worker increased at an exponential rate as shown in this logarithmic graph fr om 1958 Production of aircraft of all kinds has fa llen about 80% since until 1968 . Following that, an instability was introduced into the 1975. Most of this decline is in the production of small aircraft aircraft industry byMcNamara 'spolicy of mutually assured usedfo r recreational or other personal reasons. The production of destruction . Aircraft production shifted in proportion to aircraft general aviation aircraft does not represent defense mobilization fo r consumer or personal uses, and away from military uses or capability, although the manpower used in its production includes relevant civilian uses, such as the production of civilian air aerospace machinists. transports .

30 Science & Technology EIR December 19, 1986 fall in units of aircraft produced per production worker, ex­ presses the complete collapse in production of general avia­ FIGURE 5A tion craft from 17,000 in 1979 to 2,400 in 1984. Figure 7 Civil transports per 10,000 employees + 1 shows the decline in aircraft industry employment over the (year year) past 30 years. EIR One industry source told that if existing trends pre­ 70 vail, aerospace-defense has "five years to go before it's 60 through." Figure 3 shows that there has been a regressive structural change imposed on the aircraft industry since 1968 . In the late sixties, the U.S. physical economy began to collapse, machine-tool production reached its peak in 1967, the Apollo program peak funding and employment passed in 1968, and the United States began its pullout from Vietnam. The ensu­ ing collapse in aircraft production into 197�, produced a shift into consumer-oriented production of propellor-driven gen­ eral aviation aircraft. By contrast, the total production of militarily significant aircraft-transports, helicopters, and military craft perse-has fallen continuously since 1968 (see Table 1). This shift in the market served by aircraft manufacturers AGURE 58 comes in the midst of an across-the-board "shake-out" in the Civil transports per 10,000 employees industry. Between 1960 and 1976, in productionof each type (year/year) of significant aircraft, one-half of the companies involved, pulled out. For example, in 1960, five firms built airliners; by 1976, only three were left in that important area, and today only two. The death knell for the industry had actually begun" to sound in 1963, when Robert McNamara, with increased power fo llowing the assassination of President Kennedy, began to cancel programs right and left, and drove up costs throughout the industry in his campaign for "cost-effectiveness." The Air Force, for example, was barred from developing new long-range bombers. But McNamara's expansion of the Viet­ nam War, kept demand for military aircrafthigh relative to the 1970s. The 1960s consumer boom drove ,commercial airliner production to its peak. Several events occurred between 1968 and 1970 to col­ lapse the industry. 1) With the winding down of the Vietnam War, a large deficit in modem military aircraft existed due to the war­

imposed policy of marginally extending the life of a craft Worker productivity in the production of civilian transports beyond normal military practice. But the war had temporarily has fluctuated between about 30 and 50 transports produced per destroyed support for military production, and the new na­ JO,()()()employees per year since 1968.Up until that time, tional security adviser, Henry Kissinger, used the opportu­ productivity in the industry was increasingex ponentially. This stagnation in productiVity is shown in two different calculations . nity to implement his policy that a weaker United States On the average, it takes 18 months to produce a civil air transport. meant a safer world. Military spending as a percentage of the . On this basis, it seems reasonable to calculate productivity using a national budget, declined dramatically in the Kissinger years lag of at least one year between the shipmen( of the aircraft and of 1969-77. the employment used to calculate the productivity in its Z) A wave of monetary crises hit the Westerneconomies production . So in Figure 5a, we show productivitymeasured in terms of the shipment of the number of civil transports divided by in the 1968-7 1 period, culminating in President Nixon's re­ the number of employees in the industryof the previous year. In moval of the dollar from the gold standard. The consumer Figure 5b, we show the productivity in civilian transport boom temporarily collapsed. production calculated without a lag. By either calculation , The fall in production of military aircraft , civilian trans- productivity has stagnated since 1968.

EIR �cember 19, 1986 Science & Technology 31 FIGURE 6 FIGURE 7 Helicopters per 1 ,000 �mployees Aircraft production workers (Thousands)

900

800

700

The number of production workers in the aircraft industry has fa llen steadily since World War II. Industry employment of production workers is now about halfwhat it was in 1953 . 1968 70 73 75 77 80 84 Productivity in helicopter production has fa llen 80% since 1970. The number of helicopters, either military or civilian, produced per 1,000 employees is the measure used in Figure 6.

metal-working industry gives a rough indication of its capi­ tal-intensity, that is, the ability of the production worker to ports , and civilian helicopters has restricted funding for re­ transformnature . This ratio increasedexponentially from the search and development and tool modernization in the major early 1950s until Defense Secretary RobertMcNamara intro­ , aerospace companies. According to an industry source, de­ duced the doctrine of Mutually Assured Destruction (MAD) fense contracting is unprofitabletoday; as a result, the source in 1963 (see Figure 8). (The exponential growth appears in reports , only the profits from commercial business are keep­ the logarithmic plot of Figure 8 as a straight line. ) As James ing these companies above water. Schlesinger argued in his Political Economy of National Se­ Nonetheless, today , aircraft production accounts for 55% curity, a MAD policy based on a sufficiently large fleet of of total aerospace industry employment, and even now, the ICBMs would make basic capital-goods industries unneces­ collapsed aircraft industry has 10 times the number of ma­ sary for national defense. Since the adoption of MAD, the chine tools as that portion of the aerospace industry that number of aircraft industry machine tools per production produces rockets, satellites, and the Space Shuttle. It has four worker has dropped42% . times the number of machine tools as the ordnance industry. Some might argue that this drop is not important, citing the fact that newer numerical dontrol machine tools can do Plant and equipment aging the work of more than one of yesterday'S tools. Actually, Since the 1960s the physical plant and equipment in the more modem tools have not been introduced in a significant aircraft industry has shrunk in total size, and efforts to mod­ way. This is recorded in the continual increase in age of ernizethe stock of equipment have slowed. According to the aircraft industry machine tools since World War II. Even the Americdn Machinist Inventories of Metal Working Equip­ rate of introduction of numerical control tools has slowed in ment, the industry had 30% fe wer machine tools in 1983 than recent years. in 1977, a drop from 139;200 metal-cutting and metal-form­ The argument that more modem tools mean that fewer ing machine tools to 97,708 (see Figure 7). Fully 65% of the total tools are required, is based on false, zero-growth prem­ 1983 inventory of tools, are considered "obsolete" by the ises. In a robust economy, the opposite is true: C

32 Science & Technology EIR December 19, 1986 FIGURE S FIGURE 9 Capital intensity: machine tools per Capital intensity: numerical-control machine 100 production workers tools per 100 production workers

10 1953 58 63

The number of machine tools per production worker measures the capital intensity of a metal-working industry, such as aircraft. Figure 8 shows that this capital-intensity increased at an exponential rate as shown in the logarithmic graph from 1953 until 1963, when Robert McNamara introduced the policy of mutually assured destruction . Since 1963, the number of too Is per production worker, shown here as the number of tools per 100 production workers, has stagnated.

In metal-working industries, energy flux density mea­ sures the concentration and rate of flow ofenergy through a surface being worked with, for example, a cutting tool. The instantaneous energy fluxdensity of a tool, at its cutting edge, 1968 75 78 85 is very high. However, without numerical control, a machine The number of numerically controlled, that is, automated is cutting only a small percentage of available machine time machine tools per 100production workers has leveled off in due to time wasted in setting up the piece of metal to be growth since 1977. Numerically controlled machine tools enable worked, in changing tool bits, and in a series of other time­ the production worker to organize a higher throughputof work in consuming steps. As a result, the average energy fluxdensity the aircraft industry shop . Numerical control saves time that is unfortunately wasted in the use of manually controlled machine is low. The instantaneous energy flux determines what you tools: Time to set up the metalthat the machine is to cut or can do; the average measures how often, in fact, you do it. otherwise work on , time to change tool bits, and other operations. Numerical control automates some of the time-consum­ As a result, the number of numerically controlled machine tools per production worker gives you an indication of the relative ing manual work, preparatory to actual tool use. NC machine . tools are capable of a much greater throughput than non­ energy flux density available to the individual worker. A higher , proportion of numerically controlled machine tools means that the automated equipment; with numerical control, a cutting tool cutting tool is in use a larger percentage of time, and therefore, is spendingmore time cutting than otherwise, increasing the the average energyflux density is higher. average effective energy flux density. The number of NC machine tools per production workergrew exponentially from 1963 to 1977 and then leveled off (see Figure 9). There has been a steady decline in the percentage of industry devoted to the production of rockets and space ve­ aircraft industry machine tools less than 10 years old since hicles. In fact, in the latter, fully 84% of all machine tools World War II. At the end of the war, fully 98% of the indus­ are over 10 years old. Although the sudden occurrenceof six try-toolinventory was less than 10 years old, Until 1958, at launch failures in the West since August 1985-two Titan least half of all tools fe ll into this category. By 1977, how­ 34Ds, two Arianes, the Space Shuttle Challenger, and the ever, 77% of industry tools met . the machine-tool industry Delta-strongly suggest sabotage, the increasing obsolesc­ definition of obsolete. The decline in this percentage since ence in the industry's equipment leaves open the possibility then, is only the result of the massive retirement of older of another cause for the failures. Supporting the view that equipment that occurred as the production of general aviation industry rocket-production equipment is obsolete, is aircraft collapsed. congressionaltestimony by MartinMarietta andGeneral Dy­ This patternof increasing obsolescence has also occurred namics officials, that investment in new tools will be required in the ordnance industry and in that portion of the aerospace to gear up Titan and Atlas rocket production.

EIR December 19, 1986 Science & Technology 33 TIillFeature

Why did Moscow assassinate Premier Olof Palme?

by the Editors

NBC-TV's recent fabrication of a report of new developments in the investigation of the assassination of Swedish Prime Minister Olof Pal me , has placed the network under the strongest suspicion of collusion with the Soviet intelligence services. Also implicated are officials of the U.S. Justice Department and the Anti-Defa­ mation League of B'nai B'rith (ADL). On Dec. 4, NBC alleged that Swedish police were investigating links between the Feb. 28 assassination of Palme and U.S. Democratic presidential candidate Lyndon LaRouche. The broadcast reported that U.S. government authorities had turned over to Swedish police notebooks belonging to associates of LaRouche, which had been seized during the Oct. 6 raid of LaRouche-associated companies. The notebooks allegedly contained references to the Palme assassination. The National Democratic Policy Committee, a political action committee which supports LaRouche's programs, issued a statement on Dec. 5, denouncing the role of federal officials in fueling NBC's defamatory campaign. "It is obvious that federal authorities are deliberately leaking false and misleading information to the press," the statement said, "for the purpose of creating a prejUdicial and inftammatory climate around their ongoing investigations of associates of Lyndon LaRouche. Yesterday's leaks in fact continue an 18-year pattern of Cointelpro­ type dirty tricks by the FBI and Justice Department against LaRouche and his friends. "NBC News has been a principal recipient of these illegal leaks. In return, NBC reporters are known to be feeding information to federal prosecutors. At this point, NBC and the FBI are virtually indistinguishable. "The leaking of grand jury material-in violation of federal laws governing grand jury secrecy-has been ongoing and systematic ....The only conclusion that can be drawn is that the policy of leaking has the approval of, and is sanctioned by, high-level officials in the Departmentof Justice itself ...." Working with NBC and the FBI on the case is IrwinSu all, director of the Fact­ Finding Division of the ADL, who played a prominent role in the weeks immedi­ ately following the Palme assassination, in attempting to pin the murder on La-

34 Feature EIR December 19, 1986 Moscow's Georgii Arbatov (right) gave the signal fo r an interna­ tional disinformation campaign, which sought to blame the Palme assassination on associates of Lyndon LaRouche. The Swedish daily Aftonbladet purported to show suspect Viktor Gunnarsson demonstrating against Palme; in fa ct, the man pictured at the lower right, his fa ce covered with black square, was a Social Dem­ ocrat attempting to tear down a poster critical of Palme-as the paper admitted in a tiny note the day after!

Rouche associates. Suall recently told reporters that he has ernment's program statement did refer to its intention to attempted to help Swedish authorities locate two former improve relations with the Soviet Union, it failed to take members of the European Labor Party (ELP) , LaRouche's consistent and decisive practical steps in this direction." Den­ co-thinkers in Sweden . isov demanded that Sweden "reaffirm its policy of neutrality Swedish police emphasize that they are not pursuing any (despite the fact that in that country itself and across the "LaRouche angle" in the Palme investigation. Atlantic there are some forces that would push it off that The effort to link LaRouche to the Palme assassination, track) . " was originally launched as a concerted disinformation oper­ The key to unraveling the mystery of the Palme assassi­ ation at the highest levels of Soviet intelligence, immediately nation is Emma Rothschild, Palme's alleged mistress, the afterthe assassination. The details of this extraordinary effort daughter of Britain's Lord Victor Rothschild. Just as NBC are the subject of a new 102-page E!R Special Report, "A was seeking to re-open the "LaRouche angle" on the Palme Classical KGB Disinformation Campaign: Who Killed Olof murder, Europe was being rocked by press revelations of the Palme?" from which we have drawn much of this Feature Rothschild-Palme link-and by accusations that Lord Roth­ presentation. schild himself was the "fifth man" in the Soviet spy-ring of A key role in the disinformation operation is played by Kim Philby et al. Georgii Arbatov , the Central Committee official who heads Emma Rothschild is a member of the governing board of Moscow's U.S.A.-Canada Institute. Just hours afterPalm e's a Soviet intelligence front, the Stockholm InternationalPeace death, Arbatov had the line ready to throw investigators off Research Institute (SIPRI). She is also an officialof the Pal me the track: "I do not know who killed Palme , but I know all Commission on disarmament and security issues, rubbing too well who hated him ...fa scist hooligans ...re action." elbows with Georgii Arbatov. What was close Soviet friend Olof Palme doing, which Arbatov's assistant Vitali Zhurkin, deputy director ofthe would cause Moscow to order his murder? The complex U . S. A. -Canada Institute and a member of the scientificcoun­ issues are analyzed in depth in our Special Report. Here we cil of SIPRI, has glowing praise for E rnaRoths child: "She can just point to a startling "signal" piece which appeared in is a wonderful woman . Her work is respected not only in the January 1986 in the Soviet journal ! nternational Affairs. Au­ Soviet Union, but all over the world." thor Yuri Denisov decried the uproar in Sweden over incur­ Swedish authorities do not suspect Emma of plotting sion by Soviet submarines in Sweden's territorial waters , Palme's assassination. But what she knows, especially con­ adding the fo llowing clear message: "Troubles in Soviet­ fidences between her and Palme which might have been of Swedish relations also made themselves fe lt afterthe Pal me great interest to Soviet eavesdroppers , is of the greatest im­

governmentcame into officein 1982 . ...Although the gov- portance for the investigation.

EIR December 1 9 , 1 986 Feature 35 "according to NBC, Swedish a,thorities renewed their inter­ est in the 33-year-old who earlier was suspected in th� Palme investigation ....The 33-year old was a member of La­ Rouche's organization in Sweden." (This, despite the fact that only two months before, ort Sept. 7, the same newspaper had run a tiny correction to its own previous defamatory coverage, under the title "No Member of the ELP." Gun­ narsson is quoted, "I have not :been a member and I do not sympathize with them, although there are certainthings about which they are right.") Bizarre twists in the Swedish police emphatically denied the NBC story (see Palme investigation box). The Rothschild connection by William Engdahl Behind Holmer's bungling Of the investigation lies a cov­ er-up of strategic significance, reaching far beyond the con­ fines of the Stockholm police headquarters. On Dec. 5, the Since the assassination of Swedish Prime Minister Olof Palme Malmo daily Kviillsposten cryptically noted that in Great on Feb. 28, 1986, the officialpolice investigation has become Britain, journalists seem preoccupied, not with Gunnarsson the target for worldwide ridicule. Stockholm Police Chief and the ELP, but with the love affair between Palme and Hans Holmer has come under growing attack for the incom­ Emma Rothschild, daughter of Victor Lord Rothschild, for­ petenceof his investigation, his obsessive effort to "prove" mer crony of KGB spy Kim Philby. that the European Labor Party-friends of Lyndon H. La­ Although this was the first the Swedish public had heard Rouche, Jr. in Sweden-was somehow behind the murder of the Rothschild connection, it was nothing new to angry of the prime minister. In recent weeks, demands for Holmer's police investigators aware of Holmer's cover-up role. On resignation increased from across Sweden's political spec­ Dec . 3, one day before the NBC story, 12 top detectives trum. Twelve Stockholm law enforcement officers have re­ involved in the Palme case resigned in protest. The resigna­ portedly resigned, in disgust at the policechief' s handling of tions were prompted, according to the London Daily Mail of the investigation. Dec. 4, "because they have been thwarted by political pres­ , Then on Dec. 10, the lid was suddenly slammed down sure from conducting a proper criminal inquiry into Pal me s again. Following a meeting with Prime Minister Ingvar murder ....The Swedish government, they claim, is terri­ Carlsson, the leaders of all parliamentary parties issued a fiedof the internationalconsequences should the officers pin joint statement declaring "confidence" that the investigation down the murderer and then reveal the forces behind him. of the Palme assassination was in good hands. The exact Other officers in Stockholm CID [criminal police-ed.] claim circumstances surrounding this spectacular shift are not yet they have uncovered sensational details of the Prime Minis­ known. ter's sensational love life. But they too on governmentorders Plainly, the stakes on Holmer's cover-up are very high. had to close their files." Despite the repeated discrediting of "the LaRouche angle," The German daily Bild Zeitung on Dec . 5 revealed that an effort to resurrect it was launched by NBC-TV, in a sen­ the mistress in question was indeed Emma Rothschild, and sational broadcast on Dec. 4. NBC said that it had obtained attributed the resignation of the 12 detectives to Holmer's information that FBI officialshad shippedto Swedish inves­ blockage of this line of investigation. tigators the contents of notebooks seized in an Oct. 6 raid of LaRouche-associated companies in Leesburg, Virginia. Those Mounting pressure notebooks, NBC claimed, showed links between LaRouche Since March, Holmer has come under increasing attack. and Viktor Gunnarsson, a 33-year-old Swede interrogated on By Dec. 9 , Stockholm's largest morning daily, Dagens Ny­ March 17 and released for lack of evidence linking him to the heter. ran a page-one headline, "Hans Holmer Should Be Palme murder. Removed." A leading member of Parliament and chairman The Stockholm tabloid Aftonbladet. owned by the trade of the Judiciary Committee, Karin Ahrland, issued a public union organization of Palme' s Social Democracy, lost no call for Holmer to resign; this was followed a few days later time in going with the NBC story. On Dec. 5, in an "Extra" by similar statements by National Justice Chancellor Bengt with a front-page banner headline, "Raid on Right-Wing Hamdal and National Prosecutor Magnus Sjoberg. Group: USA Police Find Palme Document," Aftonbladetran The battered Holmer went on television to try to repair a three-page story based on the NBC account, noting that his reputation. Comparing his position to that of Homer's

36 Feature ElK December 19, 1986 Odysseus, guiding his ship, "alone, under pressure, " Holmer cited one of his favorite maxims from Voltaire, "There is nothing so uncomfortable as being hanged in silence." Dag­ ens Nyheter quipped on Dec . 10, "Holmer does not have to A LaRouche angle? worry. If he is hanged, it certainly won't be in silence." 'Oh no, not again!' The same day, Claes Zeime, chief government prosecu­ tor in the Palme case, was asked by a reporter whether re­ peated statements by Holmer that he is "on the verge" of The fo llowing wire was issued by UPI fr om Stockholm naming the murderer, the motive, or something, could be on Dec . 5: called "disinformation." Zeime replied that his office was aware of no major new element in Holmer's investigation, Police said today a man cited in a news report as the and that "the police statements indicating differently, were possible link between Lyndon LaRouche's political • disinformation' if you want to call it that. " group and the murder of Prime Minister Olof Palme is Now, the number-two man in the Swedish foreign min­ no longer a suspect. istry appears to have jumped into the fray in Holmer's de­ Police spokesmanLeif Hallberg refused to confirm fense, Cabinet Secretary Pierre Schori, an intimate of Henry or deny an NBC news report Thursday that Swedish Kissinger. Kissinger made an unpublicized 12-hour trip to policeinvestigating the Feb. 28 assassination of Pal me Stockholm from London on Dec . I. Schori was in Washing­ were given notebooks seized in October from La­ ton meeting with the U.S. State Department's John White­ Rouche's headquarters in Leesburg, Va. But he said head, among others, during the week of Dec. 5, when the the LaRouche loyalist was dropped as a suspect in NBC piece ran . March. "There is a disproportionatelygreat interest among Impact of ElR 's report journalists in the United States in one of the leads we There are several elements which make the situation in­ have followed up during the investigation," Hallberg side Sweden far different in December, when NBC tried to said. set off a new witchhunt against LaRouche, than in March, "Every time NBC or some other agency from the when Holmer led a campaign, with full international press United States calls us about this [LaRouche angle] we play, to try to pin the Palme murder on the ELP. look at each other at police headquarters and say , 'Oh One major difference is the circulation internationallyof no, not again,'" he said. a I02-page EIR Special Report, "A Classical KGB Disinfor­ mation Campaign: Who Killed Olof Palme?" The report was released at press conferences in London, Washington, Oslo, Copenhagen , and other capitals. It outlines the most detailed work of informers and lots of money. " documentation of Soviet intelligence operations in a Western Other events too have changed the correlation of forces country ever presented in the non-classified domain. The from that of March. One is the widening criminal investiga­ report has become the most discussed back-room item in tions by the U.S. governmentinto the "insider trading" abus­ Sweden, according to Swedish journalistsand businessmen. es of Wall Street's Ivan Boesky. One very prominent Swed­ It is known to be circulating in "bootleg" xerox copy through ish financier group is "up to their eyeballs" in the Boesky the Parliament, military , and business circles. affair, according to an informed Europeansour ce. The group The Malmo-based Sydsvenska Dagbladet on Dec. 6 ran was detailed in the EIR dossier, two months before the Boes­ an article on EIR 's Palme dossier, under the title, "Right­ ky scandal broke. Wing Extremist Document: KGB Orders Murder of Palme." The "Irangate" developments in Washington are another While the tone of the article is obligatory Swedish media new element. Was Pierre Schori meeting with Kissinger and sarcasm, several important items leak out, perhaps as signals Whitehead to find out how far the Iran purges might go? in an escalating factional warfare inside Sweden. According And potentially most explosive, are the revelations in to the paper, "The report charges that Palme was murdered Britain around charges that the father of Palme's alleged on orders from the Soviet spy organization, KGB , in collab­ mistress, Lord Rothschild, is a Soviet agent. According to oration with international big banks, the so-called Trust and Swedish sources, Emma, who reportedly had a townhouse international Jewish organizations. . . . The biggest Swed­ paid for by Palme near his Stockholm house, came to Stock­ ish villain in this scenario is Pierre Schori, cabinet secretary holm duringthe firstweek in December, accompanied by six in the Foreign Ministry .... The document is, however, bodyguards, one of whom destroyed the camera of a British notable in other and more serious ways. It cannot have been television journalist, when asked about her father's intelli­ compiled and published without help of a well built-up net- gence connections. She is reported in hiding at present.

EIR December 19, 1986 Feature 37 Looking at the "Emma angle" would force investigators to examine the Soviet factor in the Palme assassination. Even if one could agree that LordRothschild is not a Soviet agent, with 38-year-old daughter Emma, it's a different story� Her entirecareer is hard-wiredinto Soviet agent-of-influencecir­ cles.

The Rothschild factor SIPRI and the Trust Up until 1980, Emma Rothschild was a figure of some and the role of SIPRI secondary importance among radical-liberal networks. In 1973, she wrote a book which gave her some fame within the by Mark Burdman zero-growth-oriented left wing; it was titled Paradise Lost: The Decline o/ the Auto-Industrial Age, and was published by Random House. Observers in Europe had a sense of deja vu, when a reporter But as the Swedish family magazine Aret Runt pointed for Britain's Independent Television was assaulted, his cam­ out in a 1985 article on the Palme--Emma relationship written era smashed, by bodyguards accompanying Emma Roth­ months before the assassination · of the prime minister, she schild, daughter of Lord Victor Rothschild, as she was leav­ was a relative unknown until 1980, when, with the sponsor­ ing her home in Stockholm over the Dec. 6-7 weekend. Just ship of Palme, her career skyrocketed. a few days earlier, on Nov. 27, outside the offices of N.M. Having been well-traveled in 'the Cambridge, Massachu­ Rothschilds in London, a reporter for the Daily Mail chain setts, Chicago, and Oxford , England affiliates of Lord Ber­ had been assaulted by goons, when he tried to ask questions trand Russell's East-West "Pugwash Conference" through­ of Lord Rothschild as he was leaving the family's merchant out her academic career, she was introduced into Palme's bank. circle, ca. 1980, and was brought by Palme into a research­ Why such raw nerves among the Rothschild clan these secretarial position on the Independent Commission on Dis­ days? armament and Security Issues ("Palme Commission"). This Lord Rothschild had the political scare of his life, when brought her into contact with Soviet officials, notably Com­ suspicions began to be raised-evolving out of the current mission members Gen. Mikhail Milshtein and Georgii Ar­ British government legal effort in an Australian court, to batov, head of the Moscow U.S.A.-Canada Institute. The suppress publication of a new book by Peter Wright, a former Palme Commission also incorporates leading Western ap­ counterespionage agent for Britain's foreign intelligence ser­ peasers, including former U.S. : Secretary of State Cyrus vice MI-5-that Lord Rothschild, was the "Fifth Man," a Vance, British Social Democratic Partyleader David Owen, Soviet spy who had infiltrated British intelligence. On Dec . and West German Social Democratic Party ideologue Egon 4, Prime Minister Margaret Thatcher refused to exonerate Bahr, a friend of Henry Kissingel1. him from such suspicions, in statements made in the House Sometime between 1980 and 1984, Emma was brought of Commons. One day later, Mrs. Thatcher made a half­ onto the staff of the Stockholm International Peace Research heartedturnabout , saying there was "no evidence" that Roth­ Institute (SIPRI), and was, in 1984, at the age of 36, made schild was a Soviet agent, but failing to add the usual homilies the representativeof Great Britain on SIPRI's exclusive gov­ about his service to the nation. erningboard. As the cloud of suspicion hung over Lord Rothschild's Here, the Soviet intelligence connections would blos­ head, a new problem of Soviet connections erupted for him som. via his daughter Emma. Beginning on Dec. 4, revelations SIPRI is an importantfront for the East-West back-chan­ began to be published in the press of Scandinavia (although nel grouping best characterized as "the Trust." Operating not, initially, in Sweden), West Germany, and Great Britain, under the cover of a neutral-academic "peace searcre h" group, that Emma had been in a love affair with the late Swedish it was set up in 1966, at the initiative of Palme' s predecessor, Prime Minister Olof Palme, up to the point of Palme's Feb. Swedish Social Democratic leader Tage Erlander. It soon 28, 1986 assassination. became a pet project of the "Trust's" husband-and-wife team The stories revealed thatthe Swedish police team running Alva and Gunnar Myrdal. theinvestigation of the Palme assassination, headed by police Its 28-member ScientificCounc il has been a prime center chief Hans Holmer, had refused toeven question Emma after of Trust operations. From 1966-79, Britain's Lord Mount­ Palme was killed, despite the report that she was regularly batten was a member of the Counoil, and it was on the occa­ aware of Palme' s movements about town, and that a tap on sion of accepting an awardon behalf of SIPRI. in 1979, three her phone would have allowed Palme' s assassins to know his months before his assassination in August. that Mountbatten whereabouts on the night of the assassination. made a famous speech on behalf of the European "peace

38 Feature EIR December 19, 1986 movement." From 1966-69, Henry Kissinger, formerly an insider on the Pugwash circuit, served on SIPRI's Scientific Council, and went from there to his post as U.S. national security adviser in 1969. Contacts between SIPRI and Kis­ singer are reportedly close to the present day. As of most recent available listings, the SIPRI Scientific Council in­ A cludes two Soviets, Academician Fokin of the U.S.S.R. classic Soviet Academy of Sciences and Vitaly Zhurkin, Arbatov's deputy director at the U.S.A.-Canada Institute. There are also a disinformationjo b numberof Western "Trust" agents, including formerAu stri­ an Chancellor Bruno Kreisky. A few hours after Olof Palme was assassinated, EIR identi­ At least twice to EIR's knowledge, SIPRI has been under fiedthe initial elements of what was soonto develop into one suspicion of being an espionage front. In August 1981, the of the most massive deployments of a Soviet disinformation office of a British-born SIPRI "peace researcher," Owen campaign ever seen. Our daily monitoring of Soviet state­ Wilkes, was sealed by the Swedish security police sApo, ments identifiedan unusual rashness in the Soviet propagan­ when he was found to possess sensitive documents on Swed­ da response to the murder. ish air defenses and on U.S. army installations, including Just hours after the assassination, on March 1, Georgii nuclear bases, in Europe; earlier that year, Wilkes had been Arbatov, the chief of the U. S.A. -Canada Institute, a Central given a suspended sentence by a Norwegian court, after hav­ Committee member, and co-founder of the Palme Commis­ ing been convicted of publishing details of U.S. military­ sion on disarmamentissues , proclaimed: "I do not know who electronic communications equipment on Norwegian soil. killed Palme, but I know all too well who hated him ....I Then, on Sept. 8, 1981, the Swedish liberal daily Dagens saw demonstrations against him by fascist hooligans, inflam­ Nyheter published reports of close connections between a matoryarticl es, and provocations. Reaction loathedPalme ." Czech-emigre SIPRI consultant, Theodor Nemec, and the In the weeks that followed, Arbatov's formulation was Soviet military attache in Stockholm, Stanislav Makarov, picked up by Soviet-linked media and political conduits in­ who had been earlier expelled from Denmark and Norway, ternationally, becoming, by March 18, a world-wide barrage on suspicion of spying, and who, according to Dagens Ny­ of slanders and lies aimed at blaming the assassination on the heter, was rumored to be a military-intelligence (GRU) agent. Swedish European Labor Party (ELP) and Lyndon La­ The paper reported that, in the spring of 1981, Nemec had Rouche. caused the purge from SIPRI of a researcher who had tried to As the Stockholm policeinvestigation unfolded, and the study Soviet military installations in the Baltic. surge of press coverage in the Swedish and international media began to take shape, EIR analyzed the activities of Will the cover-up last? known Soviet disinformation specialists. These were coor­ The outlines of the Emma-SIPRI-Soviet connection are dinated with Western networkspreviously identified as work­ beginning to make their way into the press. The BritishSu n­ ing for, or manipulated by, the KGB. The names of two high­ day tabloid The People published an articleon Dec. 7, "Why level Soviet officials surfaced increasingly: Ambassador to Spy-Catchers Checked Emma Rothschild: KGB Links Sweden Boris Pankin and Sergei Losev, director general of Feared," reporting, "Swedish security chiefs feared that a the Soviet news agency TASS. peace organization in which she was a leading figure could have been infiltrated by Russia. " KGB dirty tricks: Pankin's network Contacted during the week of Dec . 8, a SIPRI spokesman According to Soviet intelligence defectors, the KGB 's arrogantly told a caller: "The Swedish police will never let Department D (Disinformation) was restructured in January the Emma Rothschild story out." 1959 by then KGB chief Aleksandr Shelepin, to coordinate But the clampdown on the Rothschild story is becoming with the Central Committee of the Communist Party , the a central factor in Swedish �etectives' and politicians' anger Committee of Informationof GRU military intelligence, and at the way Holmer's team is conducting the investigation. the KGB's departments responsible for intelligence and And that anger extends outside Sweden. As one British source counterintelligence. told this correspondent Dec . 10: "Our people here are aston­ In 1968, one year aftertaking over control of the KGB , ished by the lack of progress in the investigation over there. Yuri Andropov revamped Department D, renaming it De­ Our people feel that their opposite numbers in Sweden have partment A, and soon thereafter upgraded its status within a good idea who was responsible, but political interference the KGB organizationalstruct ure. Along witha newly recon­ is holding things back. The Swedes are terrified of finding stituted Department V (responsible for assassinations, sabo­ the evidence of Russian involvement in the killing of Palme, tage, and dirtytrick s), it was placed directly under the KGB's which everyone knows exists. " First Chief Directorate.

EIR December 19, 1986 Feature 39 Sitting atop the KGB's disinfonnation apparatus is KGB LaRouche initiated, the National Caucus of Labor Com­ Lt. -Gen. Boris Pankin, who headed Department A before mittees (NCLC) and the Europea Labor Committees (ELC). arriving in Stockholm as ambassador in October 1982. Pan­ Petrusenko wrote: kin coordinates a group of KGB and GRU officerswho could In the autumn of 1975, public attention was drawn be best described as the "LaRouche watchers" within Soviet to a statement by Per Fagerstrom, press secretary of intelligence. the prime minister of Sweden, in which he said that One of Pankin's closest collaborators is TASS director the NCLC representatives " e energetically compil­ Losev, who, according to Soviet sources, has been "central­ ing everything they can find out about leading Social izing all the infonnation aroundthe Palme investigation from Democrats. . . . " his office in Moscow." Around the axis of Pankin and Losev, The Swedish newspaper Aftonbladet wrote that the a group of Soviet journalistsand authors rotates, all of whom "ELC is operating as a pro-Communist group [sic], are high-ranking figures in the KGB or GRU. Attacks against but in reality is a North American anti-Communist LaRouche and the CIA originate with this group. It includes organization which in Sweden and other countries is "journalist" Vitalii Petrusenko, a nest of operatives at the suspected of having committed various acts of espi­ KGB "cultural" organ Literaturnaya Gazeta-Fyodor Bur­ onage and sabotage." latskii, Julian Semyonov, Iona Andronov, and Aleksandr A number of papers, including the West Gennan Sabov-as well as leading lights of the Soviet Culture Fund Die Tat, reported that fonner CIA Director William and the dean of Soviet "anti-fascist" researchers, Ernst Hen­ Colby and fonner CIA Deputy Director Ray Cline had ry. admitted that the CIA annually provided New Soli­ Consider just one example of how this group's disinfor­ darity with $90,000 and that about 80 percent of its mation has operated against LaRouche. AfterPope John Paul staff were CIA and FBI people. II was shot in May 1981, the KGB assigned lona Andronov to counteract Western exposesof the Bulgarian and Russian From such lies, it was a small step to the disinfonnation intelligence services' involvement in the assassination at­ line against LaRouche which Arbatov , Losev, and Pankin tempt-exposes in which EIR had particular competenceand put out following the Palme assassination. credibility. In a July 6, 1983 article in Literaturnaya Gazeta, Andronov wrote:

Wiesbaden. Dotzheimer Strasse No. 164. The West Gennan branchof an American subversive institution under the mask Neue Solidaritiit [the weekly founded by Helga Zepp-LaRouche-ed.]. The specialty of the Wiesbaden center is to infiltrate the ranks of the peace How to obtain EIR's movement supporters and left-leaning youth organi­ zations, shadowing them and disorganizing them from dossier on Palme's murder inside. The basic method of their diversionist intrigues is an intensive anti-Soviet propaganda. The 102-page Special Here , Andronov was using a standard KGB disinfor­ Report upon which this mation tactic. First, he portrayed LaRouche and affiliated Feature was based, organizations as a "subversive" CIA operation-printing "A Classical KGB Dis­ EIR's address in Wiesbaden for the benefit of leftist terror­ infonnation Campaign: ists. Second, he falsified a statement of an EIR correspond­ Who Killed Olof ent, allegedly attacking the CIA as responsible for the as­ Palme?" was released in sassination attempt against the Pope. This was intended to October 1986 and was convince Western specialists that EIR was working with the written by William Eng­ KGB in trying to blame the CIA for the attempted murder. dahl, Goran Haglund, In order to trace the roots of the Soviet disinfonnation William Jones, and campaign against LaRouche and the Swedish ELP, which Paolo Serri . reached its peak in the aftennath of the murder of Palme, It is available for $100fr0m EIR News Service; one has to go back to the mid- 1970s. Vitalii Petrusenko, a P.O. Box 17390; Washington, D.C. 2004 1-0390 (or close collaborator of TASS director Sergei Losev, wrote a in Europe: EIR Nachrichtenagentur GmbH; Dotzhei­ book in 1976, A Dangerous Game: CIA and the Mass Media . mer Str. 166; D-6200Wiesba den, Federal Republic of He devoted six pages to attacks on LaRouche, the newspaper Gennany). New Solidarity, and the philosophical associations which

40 Feature EIR December 19, 1986 ard held by two men, one of whom is alleged to be suspect Gunnarsson. In reality, the man in the picture is a Social A worldwide media Democrat attempting to tear down the ELP's poster (as the paper admitted in a small correction published six months 'big lie' campaign later, on Sept. 6) . The Aftonbladet story and picture are picked up widely around the world , including by the Reuter wire service. NBC-TV broadcasts a "Nightly News" item by The fo llowing are highlights of the Soviet-orchestrated dis­ Brian Ross, alleging a connection of suspect Gunnarsson to information campaign against the European Labor Party LaRouche, who is identified as the head of a neo-Nazi cult. (ELP) andiyndon LaRouche, which began immediately aft er The Anti-Defamation League's Fact-Finding Division head the Feb. 28, 1986 assassination �fOl�fPalme . Irwin SuaU is interviewed, saying it is conceivable that a person affiliated with LaRouche could commit an assassina­ March 1: Soviet Central Committee member Georgii tion. Arbatov attributes the assassination to "fascist hooligans March 19: Radio Moscow plays back Western media ...reaction ." reports that the suspect was a member of "the fascist Euro­ March 2: The Soviet newspaper Pravda blames "right­ peanLabor Party." Krasnaya Zvezda, the daily of the Soviet wing circles." armed forces, runs a TASS release citing the Swedish paper March 3: The Danish paper Ekstra Blodet claims that Svenska Dagbladet, that the suspect is linked to the ELP, "a "sources in the police leadership reveal they are looking 'political sect' with strict discipline, which carries out per­ intensely at right-wing extremist groups, such as the Swedish · se'cutions of its political opponents. Some years ago the party neo-nazis and the so-called 'European Labor Party ,' which started a 'Save Sweden' campaign. Such a 'rescue' would be also has a branch in Denmark. ' " Tageszeitung, the West carriedout by Sweden's entryinto NATO."Af tonbladet runs Berlin pro-terrorist paper, runs the same line. four pages on the ELP, including a two-page spread featuring March 6: Literaturnaya Gazeta, the Soviet KGB's "cul­ pictures of West German neo-Nazi Karl-Heinz Hoffmann, tural" journal, runs an article by foreign ministry spokesman with paramilitary uniformed troops, dogs, and skull-and­ Vladimir Lomeiko, asserting that Palme's support for "a cross-bones symbols. The headline reads, "The Neo-Nazi nuclear-free civilization," disarmament, etc., made him "a Training Camp-Here Six Swedes Were Trained." The ar­ target of the ideological adherents of violence ....At this ticle claims that Swedish ELP members received weapons moment we do not know the names of his assassins, but we training at Hoffmann's training ground. The Norwegian daily know the handwriting of political assassination." Dagbladet runs a large picture of a hooded Ku Klux Klans­ March 14: The Danish paper Berlingske Tidende reports man, claiming that it is Lyndon LaRouche. L'Unitii., the that a man was detained on March 12 by Swedish, police, newspaper of the Italian Communist Party , runs the headline, who "has been a sympathizer of the EUP [sic] and has worked "Is Palme's Killer a Hard-Core Neo-Fascist? He Was an ELP on a freelance basis for the party , among other things by Activist." The Washington Post runs a story in its first edi­ authoring articles for party/journals." In fact, suspect Viktor tion, "Suspect in Palme Case Had LaRouche Party Tie," Gunnarsson never worked for the ELP, never wrote for ELP which is pulled from later editions. publicati�ns, and never attended any ELP event. He signed March 20: After suspect Gunnarsson' s sudden release up for membership in 1984, and was removed from member­ on the afternoon of March 19, for lack of evidence against ship in 1985 . him, much of the media campaign grinds to a halt. March 16: The Observer of London runs an article by March 21: The Soviet television program Vremya airs Christopher Mosey, saying that police are investigating "a an attack on the ELP, regretting that Gunnarsoon was being possible link between the killing and an extreme right-wing released for lack of evidence and insisting on his connection political group known as the European Workers Party ." The to the ELP, "an internationalpro-fas cist organization ...in paper claims that Gunnarsson "is understood to have been a favor of Sweden joining NATO and of arming the Swedish supporter of the Party and to have held political meetings Army with neutron weapons. The partyheadquarters is in the with up to 30 people crowded into his . one-room flat in a United States. It is headed by aU.S, millionaire, LaRouche." suburb south of Stockholm." March 23: The Soviet governmentdaily lzvestiolaments March 18: The storm breaks loose: A wave of slanders the police "blunder" which led to the release of the suspect. appears throughout the Swedish and international press. Af­ Sept. 9: Radio Moscow reports that theSwedish police tonblad�t, newspaper of Sweden's Social Democratic trade are still lookinginto "the American reactionaryorganization , unions, runs lO pages on the ELP's alleged role in the Palme New Solidarity. Their hatred for him was characteristic of murder. Half of the front page is a picture of the Social the organization's Swedish branch, the Swedish Workers' Democrats' 1976 election rally , showing an anti-Palme plac- Party."

EIR December 19, 1986 Feature 41 the previo\Jslyarrested 33 -year-old man [suspect ViktorGun­ narsson, released on March 19 for lack of evidence-ed.] . Among the police officers participatingin that part of the investigation dealing with the 33-year-old, an increasing Police furious at number have abandoned their previous view of the man's involvement in themurder and now regard him as a sidetrack in the investigation. Holmer's cover-up "The more we dig into the case of the 33-year-old, the more our suspicions seem unfounded," one investigator said. Thefo llowing documentation of discontent among the Stock­ "But Holmer clings to the 33-year-old like a shipwrecked holm police at Police Chief Hans Holmer's conduct of the man to a life raft, " another police source said .... Palme inv�stigation, is excerpted from an article published In the evening of March 12, when Chief Prosecutor K. G. in Expressen on May 9. Svensson took charge of the inv�stigation regarding the 33- year-old, he detained him for complicity in the Palme mur­ "The investigation into the Palme murder is not runthe way der. Later the prosecutor went to CQurt and pressed charges a murder investigation ought to be run. Holmer has organized against him for murder. But one day before the court hearing, the investigative task force into cells where everything con­ Chief Prosecutor K.G. Svensson surprisingly withdrew his verges upon him and the leadership group," one policesource charges. said. Hans Holmer was furious with the Chief Prosecutor. Several of the most seasoned police officialsaccuse Hol­ "K.G. Svensson is one of Sweden's most experienced mer of directing the work like a dictator, saying that he is prosecutors. But Holmer has refusedto accept his view," one paralyzing initiatives because of his manner of leading the source said. work and that he is more of a liability than an asset to the What was it that made K.G. Svensson take the drastic investigation. "With some officials in the Security Police measure of opposing the police l�adership and the prevalent (SApO), there is a complete communications breakdown. notion that the arrested man was.the murderer? They think that it is no longer possible to have a reasonable "Svensson had simply examined the evidence which Hol­ conversation with Holmer," one source said. mer claimed tied the 33-year-old to the crime," one well­ One sApo official stated: "I cannot cooperate with an informed source said. amateur. Therefore , there is no longer any reason for me to Chief Prosecutor K. G. Svensson found the evidence con­ talk to the police chief." Some of the silent criticismconcerns cerningthe 33-year-old's involvement to be ...weak ....

it was drawn from police forces other than sApo, disre­ garding the experience accumulated during years of sAPO surveillanceof the PKK . The trackHolme r One day after the Palme murder, the Swedish daily Expressen received a phone call from a man who said, refused to take "Long Live PKK! Long Live Kurdistan! We have mur­ dered Palme ! Long Live Kurdistan !" Among the material Among several possible instruments for carrying out the seized during police raids of PKK homes and offices after murder of Olof Palme, the international terrorist organi­ the murder, a note was found mentioning a "wedding" and zation of the Kurdish Workers' Party (PKK) represents a Palme's name . "Wedding" is considered a code word for . main track in any serious investigation. The PKK had a "murder. " stated motive for killing Palme and had already carried The PKK has been subject to sApo surveillance since out political assassinations in Sweden and elsewhere; it at least the early 1980s, when the group was planning to operates out of secret headquarters in Damascus, Syria, a set up its headquarters in Sweden. In a secret memoran­ center of Soviet-run irregularwarfare against the West. dum to the government in September 1984, the sApo Although Swedish Security Police (SApo) pointed to warned of planned "reprisals against Sweden and first of the PKK right away as possible suspects for the murder, all against Prime Minister Olof Palme. In PKK circles, Police Chief Hans Holmer took no interest in the lead. Sweden is considered to be on a fascist leash, and there­ When a group was finallyformed to investigate the PKK, fore is an enemy of the organization. "

42 Feature EIR December 19, 1986 ations with Western financial elites, the Wallenbergs and a select network of Swedish businessmen were in the middle of these operations. Western intelligence sources have charged, that incidents of technology espionage and smuggling to the Soviet Union by several Wallenberg companies in the late 1970s, were no aberration of lower-level employees, as charged. The alle­ gation being investigated is that the Wallenberg group func­ tions on behalf of the modern-day version of the Trust as one Moscow's favorite of the most importantWestern bases of industrial espionage. Further, the families behind this corporate empire, since at Swedish bankers least the 1966 creation of the Stockholm International Peace Research Institute (SIPRI) as a key East-West channel, have been committed to the project for a "New Yalta" agreement Lyndon H. LaRouche, Jr. in a March 4, 1986 research mem­ with the Soviet Union. orandum on the Palme assassination titled "Operation Edgar One of those most active in the East-West back-channel Allan Poe," described the "bankers' faction" in the West as negotiations is Volvo head Pehr Gyllenhammar, a partnerof "an integral part of the present-day equivalent of the 1920s Kissinger Associates, Inc., a board member of the Aspen Soviet 'Trust' organization," the organization within which Institute for Humanistic Studies, as well as a fellow of the Palme's political activities have been situated. "The killing Wallenberg group. Beginning in 1972, Gyllenhammar has of Palme by such circles, or by aid of such circles, would be, had ongoing personalcontact with top Soviet KGB operative therefore, an 'inside job,'" LaRouche wrote. Dzhermen Gvishiani, a co-founder of the Club of Rome and What motive could this group have had for killing one of the International Institute of Applied SystemsAnaly sis (IIA­ their own? Was it to use Palme' s "martyrdom"to reestablish SA), and an interlocutor of Henry Kissinger and McGeorge Socialist International control over Sweden? Was it a Mos­ Bundy. cow-ordered assassination, in the same way that Moscow left the destabilization of the Philippines to the Western "bank­ The group's international ties ers' faction"? We cannot say for sure. But certainlythe Trust The internationalfinanc ial network which interlocks with must be included among the list of general suspects. the Gyllenhammar-Wallenberg group is one of the most sig­ nificant in modern finance. Through their major holding in The Wallenberg-Gyllenhammar group the highly secretive Swiss-Belgian financialholding compa­ The investigation into the Palme assassination leads to a ny Pargesa Holding SA, Geneva, the Gyllenhammar group mysterious nest of banking and corporate interests, dating links directly with the U.S. "junk bond" financial mafia of back to World War I, notably the Wallenberg-Gyllenhammar the New York brokerage firm Drexel, Burnham, Lambert. group in Sweden. During the war and into the 1920s, one of Drexel, Burnhamhas gained notorietyrecently for its rolein the most influential private banking families in Scandinavia a vast illegal international "insider trading" conspiracy, in­ was that of the brothers Knut and Marcus Wallenberg. They volving senior Drexel, Burnhamexecutive David Levine and dominated financing of the most important mining and elec­ indicted takeover artist Ivan Boesky. trical industries in Sweden and Norway at the turn of the Gyllenhammar partner Anders Wall sits on the board of century, aided by ties with the London Hambros Bank. Pargesa as well as on the board of Drexel, Burnham, Lam­ The Wallenberg family bank, Stockholm's Enskilda Bank, bert. In 1985, Drexel, Burnham reported doing $47 billion was deeply involved in financial support for the Bolshevik worth of business, primarily derived by financing an insider coup d' etat. The bank made huge profitsfrom covertlybreak­ group of financial operators reported to be the old Meyer ing the Western economic blockade of the Bolshevik regime Lansky business empire, notably such names as Steven Wynn after 1917. Then, in the 1920s, the Wallenbergs redeployed of Las Vegas' Golden Nugget Casino; Carl Lindner, the to support Nazi leader Hjalmar Schacht (later Hitler's eco­ chairman of Dope, Inc. 's United Brands; Carl leahn, who nomics minister) and the creation of the Third Reich; in the last year took over TWA airlines, and has more recently 1930s, they became involved in the secret rearmament of endeavored to take over USX, the shell of the U.S. Steel Nazi Germany through their control of Swedish iron ore, Company; Vic Posner, the mooted successor of the mob's armaments, and ball bearing manufacture . The flow of stra­ Lansky; and Wall Street's Ivan Boesky. tegic materials to the Nazi economy continued from Sweden Pargesa is the holding company which runs the secretive without interruption until the last days of World WarII . empire connected with Belgium's Albert Frere and Gerard With their rich experience in financing both Bolshevik Eskenazi, and Baron Leon Lambert of the Groupe Bruxelles Russia and Nazi Germany, it is not surprising, that following Lambert-to name just a few of the international financial the death of Stalin in 1953, when Moscow reopened negoti- connections which are elaborated in EIR ' s Sp ecial Report.

EIR December 19, 1986 Feature 43 Shultz a disgrace at NATO foreign ministers' meeting

by Criton Zoakos

The Dec. 10 NATO foreign ministers' meeting in Brussels these very valid criticisms. His approach against what the was a disgrace, and the cause for it was U.S. Secretary of alliance's entire military establishment has to say, was pre­ State George Shultz. It could have been worse-a fully trea­ sented in a key speech at the University of Chicago, on Nov. sonous affair if Shultz's European fellow decouplers, such 17. The final communique which issued out of the early as Germany's Hans Dietrich Genscher and Italy's Giulio December foreign ministers' meeting is an exact replica of Andreotti, had their way. Shultz's basic argument of Nov. 17 in Chicago. That argu­ As it turnedout , the final communique which was issued ment was: I) Reykjavik was a turning point in history, 2) after two days, was described by the ministers as "not an Euromissiles must be eliminated, 3) a residue of strategic official policy statement," but, merely, a listing of the partic­ nuclear weapons, "for insurance," can be kept afterthe over­ ipants' different views on the subject of the infamous-and all agreement to eliminate them-so as to deflectthe defense now largely inoperative-"Reykjavik proposals." These concernsof the Europeans. proposals, it will be recalled, were pushed on President Rea­ Shultz, specifically, argued: "In years to come, we may gan by three persons, George Shultz, John Poindexter, and look back at their [Reykjavik] discussions as a turning point Donald Regan, and amounted to a straightforward decou­ in our strategy for deterring warand preserving peace.... ' piing of the defenses of Europe and the United States. Essen­ For INF nuclear missiles, we reachedthe basis for agreement tially, the proposals boiled down to two elements: first, elim­ on even more drastic reductions, down from a currentSoviet ination of all strategic nuclear weapons in ten years; second, total of over 1 ,400warheads to only 100on longer range INF elimination of all intermediate-range U.S. nuclear missiles missiles worldwide for each side. . . ." And finally, the most stationed in Europe. The resulting logic of the proposals, as controversialelement , designed simply to lull the critics who they were meant to be understood by the Soviet command, charged that the underlying intent of the Reykjavik proposals was: When all Euromissiles are removed from Europe, there was to decouple Europefrom the U . S. : "Even as we eliminate will be nothing to defend Western Europe from the combined all ballistic missiles, we will need insurance policies to hedge threat of overwhelming Soviet superiority in both conven­ against cheating or other contingencies . We don't know what tional and short-rangenuclear weapons-because the United form this will take. An agreed upon retention of a small States, having eliminated its long-range strategic nuclear ar­ nuclear ballistic missile force could be part of that insur­ senal, would have no "nuclear umbrella" to extend over Eu­ ance ...." rope . The NATO foreign ministers' final communique en­ This treachery was pointed out, immediately after Reyk­ dorsed fully the proposal for the removal of all United States javik, first by NATO Generals Bernard Rogers and Hans intermediate-range nuclear missiles in Europe, the essential Joachim Mack and by U.S. Defense SecretaryCaspar Wein­ ingedient of the decoupling strategy. WesternEurope 's lead­ berger, and later by all the NATO Defense Ministers togeth­ ing decoupler, Bonn's Foreign Minister Hans Dietrich er. Shultz, at the time, took the lead in the effort to deflect Genscher, said, after the meeting, "This means that the alli-

44 International EIR December 19, 1986 ance has now clearly made its point on the zero option, and ministers' revolt on their hands. This matter of a foreign nobody should call it into question from now on. It's part of ministers' state of insurrection is much more serious than our credibility." appears to the general public. It is one which must be reme­ However, the final communique also included Shultz's died in short order, and no better remedial course can be "insurance policy," in the form of endorsing only a 50% recommended than the dismissal of George Shultz from his reduction in strategic missiles (on U.S. soil). The "complete present job. elimination," proposed at Reykjavik, would not have per­ The seriousness of the matter lies in the following: As all mitted the foreign ministers to credibly pretend that they are of NATO's military commanders know, and as Caspar Wein­ not selling out to Moscow, after they had voted for the "zero berger has frequently emphasized, the Soviet Union's current option" on Euromissiles. principal objective, both diplomatic and military, is to de­ Further similar ambiguities from the defense ministers couple Europe from the U.S.A. What these military leaders meeting were designed to permit diplomatic "ways out" in are not at liberty to say, is that this current Soviet objective their anticipated confrontations with the alliance's military is also the cornerstone of Marshal Ogarkov's warplan for a establishment. George Shultz himself, made two points on war between the U.S.A. and the U.S.S.R. Ogarkov has ar­ this matter. First, he characterized the final communique as gued and enforced in the Soviet leadership the idea that the not a policy but rather an itemization of various positions only strategic war that Moscow should ever contemplate held by various participants . "People have different views fighting is one in which Moscow's adversary should be the about it. Some people are intrigued, some people are enthu­ continental United States alone, without any allies and with­ siastic, some are reserVed, some don't think it's a good idea out any overseas military assets. As far as Ogarkov is con­ and that's the fact of the matter," he said. cerned, if Shultz's and the other NATO foreign ministers' He also told the press that the idea of retaining for "insur­ proposals were to be implemented, then the Soviet Union ance policy" a certain partof the ballistic missile force, was would be placed in a position "to shoot." his own and not the U.S. government's. Before a puzzled A U.S. decoupling from Europe, as implied in Shultz's and intriguedpress conference in Brussels, Shultz said, "It's Chicago speech-and in the foreign ministers' commu­ not a government idea. It is my idea. I talked it over with the nique-would not only transformall of Europeinto a captive President and he had no objection to my mentioning it in my of Soviet arms, and thus a mere Soviet satrapy , it would also speech," referring to his University of Chicago speech. enormously increase the Soviet Union's military blackmail The disclaimer was factually true-but only half-true . power over the U.S.A. Under those conditions, few con­ The speech was made Nov. 17, while Shultz was in Chicago strains would be there to prevent Ogarkov from launching and Prime Minister Thatcher was at Camp David with Pres­ war, should the United States refuse to give in to that black­ ident Reagan . On the following day , the White House issued mail. a statement which, reflecting the British Prime Minister's Defense Secretary Weinberger, since the Dec . 4 defense concerns, distanced the United States from the Reykjavik ministers' meeting, has made numerous public statements proposals, and defined U.S. policy to be against the decou­ warning clearly about the Soviet leadership's present inten­ piing implications of those proposals. On that day also, both tions and policies. These official warnings do not square with the defense department and the White House in separate the policies of the Secretary of State, nor with the assump­ statements renounced Shultz's Chicago speech, especially its tions underlying the NATO foreign ministers' policies. Nei­ duplicitous "insurance policy" clause. It fact, the Joint Chiefs ther the Western Alliance, nor the United States, can afford of Staff, took the opportunity to criticize the grammar, as to meet the Soviet challenge while the councils of state are well as the substance, of the offensive passage. contaminated by the treacherous policiesof the foreign min­ Subsequently, the Dec . 4 NATO defense ministers' istries. meeting took and announced a series of decisions which The clean-up in the Western Alliance must begin with a removed the alliance from the dangerous path of Reykjavik, general change of guard in the foreign ministries. The place and reiterated U.S. government policies as were clarifiedby to begin is the State Department, and George Shultz in par­ Defense Secretary Weinberger at the Gleneagles, Scotland ticular. Alone among his NATO colleagues, George Shultz NuclearPlanning Group meeting of NATO, and by the White is not an elected official; his appointment in office is not House afterMargaret Thatcher's visit to Washington . associated with electoral deals and constituency representa­ tion, as is, for instance, the case with Hans Dietrich Gensch­ A state of insurrection er. His only constituency is the President of the United States, In short, not only is the NATO foreign ministers' and at whose pleasure he serves. If the Secretary of State goes Shultz's policy "not a government idea. It is my idea," but it around saying that his policies "are not a governmentidea ," is also contrary to both U.S. government and to NATO pol­ and ifhe doesso to the detrimentof the vital national security icy. interests of the United States, then he must go. With him Both NATO and the United States findthemselves in the gone, his fellow traitors in the Europeancapitals will not be embarrassing and dangerous position of having a foreign long to follow.

EIR December 19, 1986 International 45 "massive" Soviet build-up. While it is touching to hear such Documentation concern expressed about the Soviet build-up from many of those who regularly sneer at our warnings ofexisting Soviet military power, this concern dpes not seem to hold sway at budget time, when these same critics seek to slash our needed defense spending, and to close our production lines. 'No pull-out, no In any event, this "production-line" argument is com­ pletely fallacious. It ignores the fact that the number of Soviet zero option, no SALT' warheads on strategic weapons has nearly doubled since the SALT II treaty was signed in 1979. Indeed, Soviet strategic In clear and unambiguous statements on Dec. 6, U.S. De­ forces will be almost completely modernized over the next fe nse Secretary Caspar Weinberger and NA TO Supreme decade-with or without SALT constraints. And when Mos­ Commander-Europe Gen. BernardRogers declared thatthere cow found that the SALT II agreement did curb its force will be no "decoupling" of the United States fr om Europe, modernization, it simply ignored the treaty and cheated. through a nuclear missile "zero option" or American troop Nevertheless, the House of Representatives attempted to pull-out. Europe is a matter of vital U.S. security interest. mandate U.S. compliance with the so-called "MIRVed sub­ No sooner was this said than U.S. ambassador to Germany limits" of the SALT II treaty , "as long as the Soviet Union Richard Burt contradicted their statements to the effe ct that did not violate them." For the first time in history, a legisla­ a "zero option" was still the goal of arms control. We excerpt tive body of a democracy attempted to mandate compliance firstDe fense SecretaryWeinberge r's Dec. 11 remarks before with an unratifiedtreaty that was never honored by the other the American Legislative Exchange Council in Washington, party to that agreement. . . . in which he proclaimed the SALT 11 treaty absolutely dead. The military threat posed by the Soviet SALT violations has been aggravated by its violation of the 1972 Anti-Ballistic Weinberger: SALT is dead Missile Treaty, and the increasing concerngenerated by So­ From the Defense Secretary's remarks before the Amer­ viet ABM-related activities. The Soviets have clearly violat­ ican Legislative Exchange Council Dec. 11. ed that treaty by the construction of a large phased-array missile tracking radar deep in the interior of their nation. This Everytime I read in the newspaper that the United States has radar is part of a network of radars that could supporta missile "violated the unratifiedSALT II treaty," a very unusual word defense system. Moreover, our concern over Moscow's ad­ keeps coming to mind. It is one of those words you expect to herence to this treaty is intensified by the recent discovery of get in a Trivial Pursuit game or wish you could get in a three new Soviet large phased-array radars of this type-a scrabble match. That word is "oxymoron. "It means a figure 50 percent increase in the number of such radars. These of speech that is a self-contradiction, like "Soviet journal­ radars are essential components of any large ABM deploy­ ist" .... ment. One of these radars, the one located near Krasnoyarsk, To characterize the President's decision to end observ­ is a clear violation of the ABM treaty. But the deployment of ance of SALT II as "violating" a treaty is really Orwellian. such a large number of radars, and the pattern of their de­ The treaty was never ratified. If it had been ratified, it would ployment, together with other Soviet ABM-related activities, have expired in December 1985 . And, the Soviets have re­ suggest that the Soviet Union may be preparing a nationwide peatedly and flagrantly failed to uphold the major provisions ABM defense in violation of the ABM treaty. Such a devel­ of the treaty. Under international law, actions of the type opment would have the gravest implications on the U.S.­ undertakenby the Kremlin are more than sufficientto release Soviet strategic balance. Nothing could be more dangerous the United States from any obligation to observe the treaty­ to the security of the West and global stability than a unilat­ even if it had been ratified. eral Soviet deployment of a nationwide anti-ballistic missile America cannot allow a double standard of compliance system combined with its massive offensive missile capabil­ to develop. The President's decision concerning SALT II is ities, while we stand by observing the ABM treaty, but im­ intended to get this vital message across to the Soviets. This periling our future . is especially important in light of the agreements involving President Reagan has given the Soviet Union every op­ very substantial reductions we are attempting to negotiate at portunity to correct its violations. Compliance issues have this time. been discussed for years in the proper forums and through Yet, this decision has been subjected to truly bizarre senior diplomatic channels. On two occasions, the President criticism. We frequently hear that we must accept Soviet personally raised these issues with General Secretary Gor­ violations because they have "open production" lines, and bachov. As early as June 1985, President Reagan warnedthe that SALT II is the only thing standing between us and a Soviets that their noncompliance must cease or the U.S.-

46 International EIR December 19, 1986 would take appropriate action. At that time President Reagan We are resolved never to withdraw American troops or lessen indicated that while Soviet violations were a grave concern, our engagement in Europe. Naturally, we can't speak for he would go the extra mile to give the Soviet Union more another administration, but this President will never lessen time to halt its cheating. In the following year, the Soviets our presence in Europe. leaders did not stop cheating, but rather continued and indeed increased it. Concerning Soviet demands that the United States abandon the SDl . President Reagan is not prepared to do that. That's solid.

Concering the "zero-option" President Reagan apparently Every time I read in the newspaper was prepared to agree to at Reykjavik. that the United States has "violated The proposals made by President Reagan . . . occurred under the consideration of nuclear deterrence remaining in the unratified SALT II treaty, " a very place. unusual word keeps coming to mind. That word is "oxymoron. " It Rogers: U.S. troops will stay From the general's Dec. 6 interview in Germany's means afigure oj sp eech that is a Rheinischer Merkur, under the headline, "Nuclear Weapons self-contradiction, like "Soviet Remain Our Trump Card. " journalist. " As long as the United States keeps 350,000 soldiers in Eu­ rope, they will have to protect them ....Avoid anything that could incite the U.S. to pull out these troops. . . . The decisive factor in our deterrence is the nuclear one, Therefore , the President's SALT II decision is neither and here, specifically, the option of a first-use of nuclear new nor unexpected and despite the alarms raised by some of weapons. Maybe the Soviets doubt that we would ever use the President's critics and by the Soviet Union, it has not these weapons first, but they can't be sure about that. ... harmed the cause of arms control. I don't trustthe Russians-history provt(smy skepticism. Since the President announced his decision last May, all Never forget this. . . . The only thing the Russians do respect arms control negotiations have continued ....Wi th regard is strength. to the ongoing negotiations to reduce strategic offensive arms , it was after the President's decision that the Soviets suggested The fo llowing is taken fr om Ambassador Richard Burt's es­ significant reductions. say in Die Welt Dec. 6, "Building on the Results of Reykja­ In Iceland, the Soviets tried to condition all agreements vik." on arms reduction on our effectively killing the Strategic Defense Initiative. Of course, do not forget that the Soviets At Reykjavik, the United States and the Soviet Union moved have been working on defensive technology for 25 years . In principally toward agreement on a decisive reduction of nu­ fact, it has the world's only operational anti-ballistic missile clear weapons. In 1981, President Reagan, in the name of system. It circles Moscow, and is continually updated. the alliance and on the basis of European proposals, firstput . . . Clearly, those who have argued that the Soviets forward the "zero solution" for middle-range rockets and would never accept the concept of deep reductions have been proposed the total elimination of this whole weapon catego­ proven wrong. Those who have argued that we had to accept ry . or rationalize Soviet SALT violations to improve the climate In 1982, President Reagan also proposed a decisive re­ for arms control have also been proven wrong. duction of strategic weapons. Both proposals were originally The United States intends to press for the realization of rejected by the Soviets in principle as well as in particular. our serious and deep arms reduction proposals. We cannot These proposals also encountered criticism in the West from promise that this will be a speedy or easy process. Things of some of the leading institutions that fomi ' public opinion; real value are not obtained easily. But we will never accept a they were categorized as being to ambitious. In Reykjavik, bad agreement or Soviet noncompliance. General Secretary Gorbachov, however, agreed with Presi­ dent Reagan that decisive reduction of strategic as well as Weinberger: No pull-out mid-range missiles is desirable, as is ultimately the removal Thefo llowing is takenfrom the Defense Secretary'sDec. of all SS-20, Pershing, and land-based cruise missiles in 6 interview with Die Welt of Germany. Europe. That was an important step forward.

EIR December 19, 1986 International 47 Busting up Kissinger's special U. S. -Israel relationship by Paul Goldstein

In the spring of 1982, Admiral Bobby Ray Inman, then dep­ takeover scams like those of Ivan Boesky, were part ofthe uty director of the Central Intelligence Agency, resigned scheme. from fice of , ostensibly for personal reasons. However, at However, the bankers' coup d' etat would not have been that time, EIR pinpointed the actual reason: Inman opposed as successful without one key player, Henry Kissinger. the special relationship with Israel defined by Henry Kissin­ Kissinger's gameplan, from the moment he became Nix­ ger and his British allies. The significance of this event is that on's National Security Adviser, was to reduce U. S. strategic it representsone of the underlying intelligence warfarebattles power to that of a third-rate power in a Soviet-dominated which has been ongoing inside U.S. intelligence since the world-the "New Yalta." In this connection, he negotiated Johnson administration. It is, in fact, the real story of lran­ a series of deals with Soviet Russia, each damaging to the gate. position of the United States and its allies. Traditional allies EIR's assertion is that one of the main targets for clean­ and friends were to be thrown to the wolves, and so-called up is the National Security Council's Israel connnection, a new friends such as China were to come to the fore . clean-up which, under the direction of ex-CIA deputy direc­ In this "Metternichian" system, the state of Israel would tor Frank Carlucci, will occur almost immediately. Our anal­ be transformed into a "new Venice." Its economy would be ysis is based upon not only highly authoritative sources, but based on arms-sales and dirty-money laundering. Its intelli­ on an understanding of the strategic setting in which this gence services would no longer serve Israeli national inter­ "special relationship" was forged. ests, but would become the "indispensible ally" to whom the It is also our aim, by exposing this relationship, to recast weakened United States would have to turn, because the U.S.-Israeli intelligence cooperation from the strategic intelligence capabilities of Israel would supercede what the standpoint of establishing a "Mideast Marshall Plan" in which United States could muster. Israel can become an economic superpowerfor development The National Security Council took over the function of of the region. This implies a complete break with British covert operations, emasculating the CIA. With the Vietnam intelligence's BernardLe wis Plan. War tying up many of the capabilities of the Agency, Kissin­ ger's Israelis filledthe gap in the Middle East, NorthAfri ca, The NSC connection and the Persian Gulf. With the onset of Watergate and the According to highly placed U. S. intelligence sources, the internal and complex warfare that led to Nixon's ouster, process of transformingU . S.- Israeli intelligence cooperation nearly 1,000 covert operatives 'of the CIA were purged by began in the latter years of the Johnson administration . Be­ Kissinger's ally, James Schlesinger, with aid of the Church fore that time, the CIA's counterintelligence chief, James and Pike Committees' subsequent revelations concerning CIA Angelton, had forged a unique but nonetheless authorized covert operations. intelligence exchange and cooperation. The problem began Kissinger's method was to promote the bureacratic ca­ when the powerful financial interests associated with the reers of opportunistic intelligence and military officials whose "friends of Israel," including the gangster Meyer Lansky, loyalties would thereby be to him. These officials were put sought to replace the regular intelligence cooperation with a in touch with Israeli intelligence, furthering Israeli penetra­ new operation. This new operation would include a "New tion of U . S. intelligence. Yalta" deal with the Russia and would enhance the power of Key was the removal of James Jesus Angelton, the CIA those Eastern Liberal Establishment financial interests of counterintelligence chief who ran both the Israel and Vatican Boston and New York, and their European allies in London, desks. AngeIton's view of the United States' proper Israeli Geneva, and Hamburg, at the expense of U .S. national inter­ connection was shaped by his experience in World War II in ests. The cartelization of world finance, featuring corporate Italy, when members of the Hagannah worked with him. He

48 International EIR D.!cember 19, 1986 knew that certain forces inside Israel and Britain, such as operational base in the U . S. intelligence community, recruit­ Lord Victor Rothschild-now the subject of an intense fac­ ing former CIA officials whose loyalty was no greater than tional warfare in Britain-were members of the Soviet-run the paycheck they drew . Protection not only involved the "Trust." As a few insiders of the intelligence community NSC, but the Justice Department, to the point that the DOJ knew, Angelton had a file on Kissinger's role as a "Trust" and certain forces within the FBI cooperated with Israeli agent. intelligence to destroy some deep-cover CIA operations not under NSC or Israeli intelligence control. Unauthorized private financing This is the real significance of the blowing of the Wilson­ Kissinger's NSC operation was financed independently Terpil affair and the subsequent arrest of ex-CIA operative of officially authorized budgetary requirements by the Edwin Wilson. "Banker's Faction of CIA." According to one source, the The NSC deployed Michael Ledeen to work with a Justice private financing reached into the $600-800 billion range, Department prosecutor, Lawrence Barcella, instructing him underwritten by banks, multinational oil corporations, and how to set up Wilson while protecting other players in Wil­ the international drug trade . son's apparatus, such as General Secord. According to these Kissinger's allies inside the intelligence community in­ sources, Ledeen worked with Assistant U.S. Attorney Ted cluded CIA directors William Colby and Adm. Stansfield Greenberg of the Eastern District of Virginia in Alexandria, Turner. Colby's apparatus included a network of covertwar­ whom these sources consider a Mossad asset. Ledeen himself riors, including Theodore G. Shackley, and his close asso­ is one of the top operatives in the Iran-Contra arms ship­ ciate, Gen. Richard Secord, who became one of Kissinger's ments, along with the former number-two man at the Mossad, most loyal paid operatives. David Kimche, who was instrumental in setting up the secret Secord, who is front and center in the entire Iranian and Camp David accords. Contra affair, received his brigadier-general's star directly from Kissinger. Secord's relationship to Israeli intelligence The Iran/Islamic card operations in the Persian Gulf stems from the period he head­ The political base for these covert operations is provided ed the U.S. military assistance program in Iran under the by the "neo-conservative," Washington-based think tanks , Shah during the 1975-78 period. It was during this period the Heritage Foundation , the American Enterprise Institute, period that the Israeli connection inside U.S. policy-making Georgetown's Center for Strategic and InternationalStudi es, and intelligence operations was consolidated. What began as and the Unification Church-the Moonies. Many of the a game of influence for Israel, became a deadly game for strongest proponents of a Venetian version of Israel are po­ total control. With the advent of the Carter adminstration, litically defined as right-wing social democrats tied to the through into the Reagan administration, the Mossad tentacles "Our Crowd," New York investment banks and their London came to reach into the highest power centers of the U.S. cousins, centered around the Rothschilds. government. This apparatus became one of the dominant forces inside the Reagan administration. The NSC apparatus not only re­

Mossad-U . S . A . mained intact, but extended its operational capabilities into During the Carter administration, an additional 800cov­ the State Department when Richard Allen and Alexander ert operatives were summarily dumped from the CIA's pay­ Haig were National Security Adviser and Secretary of State, roll. According to high intelligence officials, the infamous respectively. Turner-Mondale-Brzezinski purge of 1977-78 was carried The 1982 Reagan Mideast Peace Plan and King Fahd's out by Ted Shackley, who targeted those U.S. intelligence complementary Fez Plan were sabotaged by this network, elements involved in Vietnam and known to be opposed to which resulted in the President, and his new National Secu­ Israeli interference in U . S. affairs . rity Advisers Clark and McFarlane, adopting the Iran/Islamic The operation was consolidated in the secret Camp David Cardpolicy . With the Israeli invasionof Lebanon after Haig's accords. The Israelis were given near total access to U.S. green light to Ariel Sharon, the United States became locked military equipment. Moreover, Israeli intelligence was given into a no-win Middle East situation. It was simply the policy five major U.S. port facilities: Galveston, Texas; Newark, of 1969, run by the Kissinger apparatus of 1969 . New Jersey; Miami, Florida; Los Angeles, California; and Irangate provides the opportunity for patriotic forces in Baltimore, Maryland. When the Carter administration and the United States, forces that desire U.S. survival as a super­ Congressimposed an embargo on U.S. arms exports to Ibero­ power and a Marshall Plan for the Middle East, to destroy America on the pretext of "human rights violations," the this policy-making capability and to retake covert U.S. intel­ National Security Council provided the Israelis the opening ligence capabilities from the hands of the "Trust. " The only they needed into that region to sell U.S. and Israeli equip­ question remaining will be whether forces inside Israel, who ment. no longer desire to play Kissinger's game, have the moral Under this arrangement, Israeli intelligence expanded its courage and political will to change.

EIR December 19, 1986 International 49 KissingerWatch by M.T. Upharsin

shuttle" came just before NBC-TV's land arranged for $38 million in deals Scandal shuttle on concocted story on Dec. 4, trying to between his business concerns and implicate Kissinger's chief nemesis, Qaddafi , essentially providing the the northern route Lyndon LaRouche, in the Palme case. amount that was being demanded by In early December, Henry Kissinger Kissinger's Swedish alter ego, Pierre Qaddafi from Britain. has been well traveled on what might Schori of the Swedish Foreign Minis­ Rumor has it that the Heath gov­ becalled the "northernscandal route." try, was just returning from a trip to ernmentin Britain approved that deal. Sometime around the night of Dec. 1 the United States. As Heath's chief "NSC-like" adviser, or the morning of Dec. 2, Henry left Robert O. Anderson's longest­ Lord Victor Rothschild would likely Great Britain, where he was being standing business and politicalpartner have had some role in the affair, es­ sponsoredby Mirrornewspaper chain is Thornton Bradshaw, chairman of pecially given his history of insider magnate Robert Maxwell, and made a the boardof RCA , NBC-TV' s holding operations as an intelligence coordi­ mysterious 12-hour trip to Sweden. company. nator at Shell-UK and Royal Dutch Then, he returned to Britain, and was Shell in the 1960s. monitored by the high-society set, The full story of Henry Kissinger speaking at a dinner in his honor at the and Muammar Qaddafihas never been exclusive Claridge's, given by the told, although . many relevant leaks American Robert O. Anderson, head Lonrho, Libya, have come out. The Rowland tale will of the Atlantic Richfield (ARCO) oil make it easierto pull together. Dr Rothschild multinational. .K, Row land is a "Palace" production, As usual, it was quite an inces­ Anderson sold the British weekly, the and his Libya projects, today , may re­ tuous affair. Anderson is one of the Observer, in the early 1980s, to "Tiny" flect Buckingham Palace's anger at four founding directors of the Kissin­ Rowland, of the Lonrho (London­ Maggie Thatcher's support for the ger Associates consulting firm, with Rhodesia Ltd.) multinational. Seated April 1986 U.S. raid on Libya, an is­ Henryhimself, Swedish magnate Pehr in the dinner-audience at the Clar­ sue that surfaced in the summer "Pa­ Gyllenhammer, and NATO General­ idge's affair were three top directors lace gate" scandal. Rowland was a no­ Secretary Lord Carrington. of Lonrho, including Lonrho Chair­ body until " he was picked up in the It was an interesting time to shuttle man, Edward duCann, a Tory mem­ early 1960s by then Lonrho chieftain, back and forth between Britain and ber of the British Parliament. There Angus Ogilvy, who has since become Sweden. On the one side, Kissinger's are unconfirmed reports that Rowland a member of the Royal Family via his old collaborator, Lord Victor Roth­ himself made an appearance. marriage to Princess Alexandra. Ogil- . schild, was hit by charges of being a A recent feature article in the Brit­ vy turned Lonrho, then not a power­ Soviet spy, and only exonerated by ish magazine Business documented house company, over to Rowland, who Prime Minister Thatcher on Dec . 5; that Rowland was "hard-wired" into made it a multi-billionaire conglom­ Kissinger and Lord Victor would have business deals with Libya's Colonel erate, with vast operations in Africa. been in a tight relationship during the Qaddati , through the mediation of Said Ogilvy told Business that the Brit­ 1971-74 period, when Kissinger was Qaddafadam, a cousin of Qaddafi . ish politician he admires most, is for­ building his parallel government in the Rowland, so Business and other re­ mer Foreign Minister David Owen. U.S. National Security Council, and ports indicate, has been in Libya in Owen, a member of the Trilateral Rothschild was made the chief coor­ past weeks, and is negotiating to take Commission and the Soviet-linked dinator of a new, U. S. NSC-modeled over the operations of the American "Palme Commission," has held pri­ Cabinet Office Policy Review think oil companies which left Libya after vate meetings with Prince Charles, to tank, established by Kissinger inti­ President Reagan declared a boycott exchange strategies on "constitutional mateEdward Heath , prime minister at last spring. reform" in Britain. In private, he is thetime . The deeper story, now emerging, also praised by Soviet journalists in In Sweden, Victor's daughter is that Rowland was already moving London, who bill him as the U.K. pol­ Emma was in the spotlightfor her role into theinside in Libya, in 1971. Qad­ itician of the future . in the circumstances leading to Olof datiwas then anathema in Britain, be­ Of course, both Owen and Heath Palme's Feb. 28 assassination. cause of his funding for the terrorist were at the bash thrown for Kissinger Kissinger's Dec. 1-3 "scandal Irish Republican Army. Yet, Row- at Claridge's by Robert O. Anderson.

50 International EIR December 19, 1986 Vatican by Augustinus

Economic justice theme of Asia trip the expenses should not be counted, The Pope "costs more than the Queen," fo r good reason-and when we were paid for at an inestim­ able price" (referring to Christian re­ the rulers in the Kremlin are in a quandary. demption, at the cost of the Christ's crucifixion). When someone rajsed the trip by Queen Elizabeth II to Austral­ ia, which had cost much less, he said, "I cost more than the Queen, thank On Nov. 18, John Paul II under­ "Science, together with the truth it God. Yes, because themessage I carry took the longest of his pastoral trips, bripgs in itself, does not abandon the has its value, a transcendant value." taking him to six countries: Bangla­ persons who suffer from scornfor hu­ It has become usual for the Pope desh, Singapore , Fiji Islands, New man life, and from violence. The great to use these exchanges with journal­ Zealand, Australia, and Seychelles. In nobility of the human mind is based ists during his travels to bypass the his first important engagement after above all on the capacity to know God filter imposed by the Vatican Secre­ the Oct. 27 peace encounter in Assisi, and to probe ever more deeply into the tariat of State on informationabout the and consistent with the ecumenical mystery of God's life and to discover Holy See's policy. This is how the purpose of that event, the Pope went man there, too." Pope's statements released on the plane to countries with non-Catholic major­ He also went to the island south of to Bangladesh, about a possible tripto ities. Australia, Tasmania, which was set­ Moscow, should be read. John Paul At Dacca, capital of Bangladesh, tled by European convicts, and met clarified the issue with a simple reply: he stressed once again the injunction with unemployed in the old capital city "I am not talking of a trip to Moscow; of Genesis and its consequences for of Hobart. He told them: "The Church for me a trip to Lithuania would be in economic policy: "Man's task on this is confronting the problem of unem­ the line of my duty." He said this to Earth therefore , is to make his own ployment as a human problem, a prob­ respond to the journalists' insistence, life more human and to subdue the lem which influences the life and dig­ who quoted the Metropolitan Filaret entire earth to this end. In this sense nity of man, a problem with a deci­ of Kiev. The Pope ruled out a spiritual man is the master of all material real­ sively ethical and moral character. voyage because there areno Catholics ity" and "priest of the cosmos ." For "Man's eternal destiny is tightly in Moscow, only Orthodox, and ruled this "dignity not to be ruined by pov­ linked to all the elements that influ­ out a political trip, thus sweeping aside · erty , hunger, and disease, by the lack ence human freedom, human rights, the Secretariat of State's dreams of a of dignified conditions of life and the and human progress. Work-or lack papal mediation between the U. S.A. chance of getting an education and of work-is one of these elements, a and the U.S.S.R. finding a job, the conscience of the very important element. Two years ago, Moscow refused world must be put on alert to defend "Unemployment is the privation to let the Pope visit the Lithuanian the image of God in man." of all the values that work represents Catholics for the Fifth Centenary of On Nov . 20in Singapore, the city­ because it contributes to the support St. Casimir. Also, the Pope has a crit­ state at the southern tip of the Malay of individuals, families, and society. ical attitude toward the Yalta accords. peninsula, the Pope stressed: "Where "When one speaks of moral obli­ It is not accidental that in the pontifical there is not justice there cannot be gation of work, it is understood that yearbook, Lithuania is listed as an au­ peace. Peace is possible only where a everyone has the right to contribute in tonomous state, together with the re­ just order guarantees everyone's a real way to the great task of 'human­ publics of Lettonia and Estonia. rights. World peace is possible. only izing' the universe, that is, to make Sources attribute the indefinite when the international order is just." the world a more hospitable place and postponement of Soviet leader Gor­ In Australia, John Paul II spoke to a better instrumentof personal and so­ bachov's trip to Italy, to Pope Wojty­ cultural leaders on the mission of sci­ . cial development. " la's statements. Faced with the Pope's ence: "By its very nature, science is In the plane returningto Rome, the explicit request to visit Lithuania or theocentric in the last analysis and as Pope was questioned by journalists the Ukraine, not Moscow, the Krem­ such renders a great service to human­ who asked if his trips did not cost too lin leaders have not yet found an an­ ity . much. John Paul II replied: "I think swer.

EIR December 19, 1986 International 51 Report from Bonn by RainerApel

An adviser who came in from the East Gorky, Y{here he got to know many Aprpfi le of Wolfgang Seiffert begins to answer the question: who play�d a leading role in the East Genoan regime later, Seiffert re­ Who is behind the pro-Soviet conservatives in West Germany? turned to' Genoany as an "anti-fas­ cist," assigned to help build a Ger­ many un4er Soviet control. Seiffert's special task from 1949 on was to re­ cruit youth in the western partsof Ger­ many for the FDJ (Freie Deutsche Ju­ An aspect of the West Genoan po­ fert writes that Gorbachov' s planned gend) , a communist-run youth front litical landscape which is coming to refono of the Soviet economy will run then headed by Erich Honecker-to­ the fore is the existence of a "Moscow into bottlenecks under conditions of a day's ruler of the GenoanDemocratic Faction" among the Christian Demo­ new anns race with the United States. Republic (GDR). The manifesto of the crats of Chancellor Helmut Kohl. If Gorbachov can't stop-as Reykja­ FDJ stated: "The real fatherland of the These are politicians who foresee a vik showed-Reagan's sm project, Gerinan youth is the G.D.R." military disengagement of the United he will have to make sure that the pow­ In 1950, Seiffert was editor-in­ States from Genoany, and propose a erful West Genoaneconomy does not chief of lunges Deutschland. the of­ "historic deal" between Bonn· and work for America's strategic defense, ficial magazine of the FDJ published Moscow. Meeting the Soviet need for writes Seiffert. in Frankfurt,West Genoany. Westernhigh-technolo gy, they claim, Gorbachov would have to make an Since the FDJ was, on orders from would allow a settlement on mutual "irresistible offer" to Bonn to drive a the East, inciting riots against West security between Moscow and Bonn wedge into the Genoan-American al­ Genoants reannament and its inte­ at a "lower level of annaments." liance. This offer would be the reuni­ gration into NATO, the youth group These arguments originate mainly fication ofGenoa ny. The price to the was banned as anti-constitutional in in the community of ex-advisers of the West Geonans would have to be in­ 1952. A year later, Seiffert was ar­ East Genoan regime, who moved to tense cooperation between the reuni­ rested by West Genoan police, tried, West Genoany in the past 10 years. fied Genoan economy and Gorba­ and sentenced to four years in jail in The most prominent of these "advisers chov's "new economic policy." Such 1955. In early 1956, Seiffert escaped who came in from the East" is Prof. an arrangement would also please and made his way to the G.D.R., Wolfgang Seiffert , an economics ex­ Bonn's security interests under con­ where his prior contact with Erich Ho­ pert working with Kohl's Christian ditions of U. S. disengagement from necker helped him to make a career in Democrats . Seiffert was one of the Europe, insinuates Seiffert , adding that the pro-Soviet regime; In 1956 al�o, chief economic experts in East Ger­ such a deal could promote a "profound the West Geiman Communist Party many for some 20 years between 1958 historic friendship between the Ger­ (KPD) was banned by the Bonn gov­ and 1978. Specializing inWarsaw Pact man and the Soviet peoples." ernment.. economic affairs, he also prepared nu­ This sounds like Gorbachov' s talk When in 1968, the KPD was re­ merous "joint ventures" between the about "our common home, Europe," founded under the new name DKP, two Genoanys, allowing a transfer of which he claims defines common po­ Seiffert worked for his own legaliza- high-technology from the West. litical, economic and cultural interests . tion, to "returnto the West." The 1955- In February 1978, Seiffert moved of "all Europeans fromthe Atlantic to 56 arrest warrant against Seiffert was west to settle as a professor of inter­ the Urals." No doubt: Wolfgang Seif­ dropped by West Genoan �sident national law at the University of Kiel. fert is a co-thinker of Gorbachov's Gustav Heinemann (a Social Demo­ Since then, he has published detailed "new economic policy" team. cras) in September 1969. But it took plans for broadened economic coop­ A look into the political career of another five years for Seiffert to move eration between East and West in nu­ Wolfgang Seiffert tells the story. Re­ west-a period he used to build his merous essays and books-proposals cruited to the Genoan AnDy in 1944 , image as an "East Genoandissid ent." which have beendiscussed a lot among he was taken prisoner of war by the It is this image which many in West conservatives in West Genoany. Soviets in early 1945, and underwent Genoany doubt: It is rather believed In his latest book, The Whole Ger­ re-education in the Red AnDy's POW that he was sent west on another "spe­ many. published in November, Seif- camps. From the exclusive camp at cial assigment," as in 1949.

52 International EIR December 19, 1986 Report from Paris by Yves Messer

Student demos used against Chirac qua (the interior minister) and anti­ Trilaterals, Trotskyists, and Socialists all have their hands in the Chirac. On Dec. 10, a demonstration was organized to protest the "repres­ movement being manipulated against the government. sive methods" of the government's policefor ces. So, the movement was conscious­ ly degraded to enrage the students and shift them toward a Green-like or On Dec. 4, more than a half million Chirac so busy with internal affairs "rainbow coalition-like" movement, students, 1 million according to the that he will be distracted from the in­ since the overtly anti-technology, anti­ organizers, demonstrated in France ternational scene. In this regard, it IS nuclear, or pacifist movements as such, against a bill on the universities, known the continuation of the De Borchgrave don't get much positiveresponse from as the Devaquet bill. affair which triedto sabotage Chirac' s French youth. The demonstration grew out of an foreign policya few weeks ago, when The Devaquetbill , which suggest­ ongoing mobilization that started two Washington Times editor Arnaud de ed a narrower selection of students (a weeks before . By Nov. 27 some Borchgrave leaked quotes from an off'­ practice which already exists), had 400 ,000demonstrated all over France the-record interview on Mideast poli­ awakened the fear of the future, of not against the Devaquet bill, on the day cy with the French premier. having a job. The general themes of it was to be debated in the National The student uproar started Nov. mobilization were "equality" and Assembly. As a result, Universities 17 with a strike at Villetaneuse Uni­ "fraternity," as people are fed up with Minister Devaquet was forced to step versity and then on Nov. 22 at the the sterile partisan left-right debate. down, and his bill was withdrawn. Sorbonne, well-known in France and Hence, unlike May 1968 this is a Another result is that politicians are elsewhere as a counterculture haven. movement based on so-called moral ganging up on the RPR government, The student union UNEF-ID, con­ values such as "justice and equality. " from "left"to "extremeright ," includ­ trolled by PCI Trotskyists who tacti­ The Trotskyists are trying to shift it ing Raymond Barre of the Union of cally merged with the Socialists in towarda movement radically opposed French Democracy, Chirac' s main April this year, called for spreading to the anti-terrorism, anti-AIDS, anti­ political rival in the government ma­ the strike to all the universities. drugs, allegedly authoritarian moral jority coalition. The next day, 200,000 rallied in order of the Gaullists. This was the first time since May the Paris streets, organized by the This manipulation of student opin­ 1968 that a mass student movement teachers' union, the Federation ofNa­ ion started earlier, when the theme of has been created in France. Then, it tional Education , controlled by the "fraternity" mobilized thousands of was aimed against President Charles Socialists and Trotskyists, a powerful people ofNorth African origin born in de Gaulle and led to his fall; today it network of interests within the nation­ France. Their movement, SOS-Rac­ opposes the Gaullist government of al education system, with millions of ism, is also controlled by Trotskyists. the RPR's Jacques Chirac. The move­ members andbillions of French francs. Not surprisingly, the people organiz­ ment is controlled by the Socialists The movement peaked at the Dec . 4 ing the student movement are mem­ through a tactical alliance with the demonstration, when provocateurs bersor sympathizers ofthis SOS-Rac­ Trotskyists of the PCI (International­ from both "extreme-left" and "right" ism. ist Communist Party). ran riots against the police with mol­ Two figures are emerging out of The purpose of organizing that otov cocktails, steel bars, and paving this social upheaval: President Fran­ kind of mass movement is 1) to pre­ stones. One provocateur was even seen �ois Mitterrand, the "monarch," pare the ground for the Socialist Party aiming a pistol, a method reminiscent "abovethe mel�e ," defending the "op­ in the 1988, or maybe earlier, presi­ of the Red Army Faction-Greenies in pressed minorities" and giving points dential elections, 2) to block the anti­ West Germany. to the government as an arbiter; and drug, anti-AIDS, and anti-terrorist Hundreds were hurt, and one was Trilateral member Raymond Barre, policy initiated by Chirac' s govern­ killed. The Socialist Party then ap­ who has played the role, since he be­ ment since last spring-a policy the pealed unofficially through its media ganrunning for President, of the man Socialists call the "new moral order." to change the orientation of the move­ "outside the parties," "neither leftnor More broadly, the aim is to keep ment from anti-Devaquet to anti-Pas- right." Indeed: "Trilateral."

EIR December 19, 1986 International 53 Andean Report by Mark Sonnenblick

AIDS conferences held in Lima tioners kept honing in on potential Peru's battle against the IMF gives it moral authorityto propose mosquito transmission of AIDS and how IMF loan conditions cause vital solutionsfo r AID S in the tropics. social services such as health and san­ itation to be written out of national budgets. One officer confided that the mil­ itary considers AIDS a national secu­ Peruvian doctors responded with genocidal economic policy imposed rity matter, because two-thirds of the alacrity to learning of the links be­ on the Third World." country's area is jungle, where every­ tween poverty andthe spread of AIDS This thrust broughta consensus of one is bitten by mosquitos and other into non-homosexual populations. At Peru's medical and military leaders insects many times daily. a medical conference in Lima, Dec. that they should lead an international Peru's leading AIDS specialist, 9, it was conclusively shown that the offensive against AIDS . Dr. Raul Patrucco, Immunology Chief conditions of misery caused by the In­ The president of the Peruvian of the Alexander von Humboldt Insti­ ternational Monetary Fund, make the Medical Federation, Dr. Hugo Dfaz tute of Tropical and High Altitude tropics into the best possible culture Lozano, told the conference, "Peru has Medicine at Cayetano Heredia Uni­ for AIDS . the moral stature to claim leadership versity, noted that in every country, The conference, "AIDS , the Black in a campaign of this type, because its officials are shocked when AIDS first Death of the 21st Century," was co­ own President is the main bulwark of appears , but "the epidemiological sponsored by the Schiller Institute and defense of his population by having chain of infection and transmission" the PeruvianMedical Federation . The retained funds which previously served soon makes it irrelevant how it first evidence was systematically pre­ to pay debt and [using them] to im­ got into the country . sented by Dr. Debra Freeman, a Bal­ prove living conditions to counteract Before organizing began for this timore-based public health adviser to the possibilities for the spread of this conference, AIDS was not taken seri­ the National Democratic Policy Com­ disease." He concluded, "In Latin ously by the Peruvian Health Minis­ mittee, and by Dr. Bertha Farfan, a America, the medical federations met try, which took its cues fromthe World Mexican physician whose organizing a few months ago and we have formed Health Organization. As Peruvian has just forced the Mexican Health the Medical Confederation of Latin medical professionals became briefed Ministry to classify AIDS as a conta­ America and the Caribbean. I have on the generally suppressed findings gious disease which must be centrally promised the Schiller Institute to bring that mosquitos and other blood-suck­ reported. whatever is proposed here to the next ing insects are likely vectors for AIDS Interviews with Drs . Freeman and meeting of that body. Let us hopethat under conditions of intense poverty, Farfan published in the press and on we can make this movement [against things got hot. At first the health min­ the radio shortly before the conference AIDS] that of America and the Car­ istry ordered doctors at key AIDS brought many of the 300 attendees. ibbean. " treatment centersto shut up. But after The coverage focused on the sup­ Dr. Dfaz observed, "the Medical Drs . Diaz and Patrucco had a fire-fight pressed evidence of mosquito trans­ Federation would not have been able in the press with Health Minister Dav­ mission of AIDS and on the interac­ to carry out this event without the de­ id Tejada, things changed. tion between poverty and disease. EI cisive participation of the Schiller In­ Patrucco told the conference that Popular of Dec. 9, for example, quot­ stitute. " Tejada had promised to take AIDS se­ ed Debra Freeman: "The austerity im­ Medics from Peru's army, navy, riously. One of the piquant moments posed by the International Monetary air force, and police hospitals com­ during the question period at the end Fund on debtor countries has created prised one-third of the audience. One of the conference came when public the unhealthy, filthy, and impover­ medic reportedthat thePeruvian army healthbureaucra ts, protesting that they ished conditions in which AIDS prop­ already has AIDS on its list of deadly couldn't do anything about it, were agates with greatestvirulence . . . . In contagious diseases. During this pub­ severely reprimanded by one of the Africa, 50% of those infected are chil­ lic seminar and another the next day physicians in the audience and told to dren. Political leaders have tried to at the military hospital, attended by start testing blood donors and map­ keep this silent so as not to reverse the 150 officers from all services, ques- ping the disease nationally.

54 International EIR December 19, 1986 MotherRussia by Luba George

The KGB and the Dzerzhinsky method to describe the "method": "We stand Moscow is now going beyond the ritual praise of the Cheka, the for organized terror.... Terror is an absolute necessity during times like predecessor to the KGB . these ....The Cheka is obliged to defend the revolution and conquer the enemy even ifits sword does by chance sometimes fall upon the heads of the ' innocent." Later he wrote: "My think­ He Was a Chekist" was the head­ thinking on two leading Bolsheviks: ing compels me to be merciless, and I line of the Dec. 3 Soviet military dai­ Maxim Gorky, the cultist-satanist have the firmdetermination to follow ly, Krasnaya Zvezda, honoring the founder of the "Capri School" of Na­ my thinking to the ultimate ....We lOOth anniversary of the birth of Ya­ tional Bolshevism, and Cheka's first show no mercy. We terrorize the ene­ kob Kh. Peters, co-founder with Felix head, Felix Edmundovich Dzerzhin­ mies of the Soviet government in or­ E. Dzerzhinsky of the Bolshevik in­ sky. Acccording to well-informed der to stop crime at its inception." By telligence agency, the Cheka. The sources, Andropov was the key figure 1921, by conservative estimate, more Cheka, forerunner of the KGB , is the in the KGB to vigorously campaign to than 50,000 businessmen, intellec­ acronym for the All-Russian Extraor­ revive the image and methods of "Iron tuals, prosperous farmers and peas­ dinary Commission for Combating Felix" Dzerzhinsky. On one wall of ants, officers, had been randomly ex­ Counterrevolution and Sabotage, Andropov's office, in the Dzerzhin­ terminated. founded on Dec . 20 , 1917. The article sky Square complex which headquar­ One of the Western Trust's lead­ praised the work of Peters and Dzer­ tered the KGB , hung Dzerzhinsky's ing figures in this century, the late W. zhinsky in their "merciless" fight portrait. Averell Harriman, U.S. ambassador against "counterrevolutionary ele­ Shortlyafter being appointed KGB to Moscow during World WarII, said ments." The same week a similar ar­ chairman, Andropov in an address to in a New York Times commentary ti­ ticle in praise of Peters and the Cheka staff members (Dec. 20, 1967) paid tled "Let's Negotiate with Andropov" appeared in the official daily Izvestia . extravagant tribute to Dzerzhinsky, (Jan. 2, 1983) that the new leadership The Cheka, together with Lenin's recalling that V.1. Lenin had instruct­ inthe U.S.S.R. was "pragmatic as well Foreign Ministry, was at the center of ed the Cheka to exercise "merciless as determined." Similar labels are arranging economic , political , and and immediate repression." On Sept. being applied today to Andropov's strategic dealings with pro-Soviet 9, 1977 Andropov, in a commmemor­ heir, Mikhail Gorbachov. Western oligarchic circles, which were ative address for the l00th anniversa­ Andropov's role in reorganizing given the appellation, the Trust. Pe­ ry of Dzerzhinsky , eulogized "Old Fe­ the KGB by Dzerzhinsky's "merciless ters , a Latvian Bolshevik, was instru­ lix" to near-sanctification. In the method" is key to understanding the mental with Lenin's first foreign min­ speech entitled "Communist Sense of Gorbachov era. The Gorbachov-Li­ ister, Georgi Chicherin, in emphasiz­ Conviction Is a Great Force of the gachov leadership today was groomed ing collaboration with the Swedish Builders of the New World," Andro­ under the tutelage of Andropov. component of the Western "Trust" pov recalled that Dzerzhinsky had act­ Gotbachov's propagandachief and networks. Resurrecting the memory ed within the framework of "socialist the Soviets' leading U.S.-Canada ex­ of Peters is thus a Soviet signal in the legality" and "in accordance with rev­ pert, Alexander Yakovlev, is one of aftermath of the Palme murder to olutionary law" in conducting mass the prime architects of the Kremlin's Scandinavia to work out a new "Trust" murders and planting political dis in­ "new thinking," which embodies ideas arrangement. formation and assassination forces. articulated by a group of KGB-trained Dzerzhinsky's counterpart in di­ Despite many changes since then, An­ intellectuals brought to the fore by the plomacy, Georgi Chicherin, too, is dropov concluded, the "basic function "reform-minded" Andropov, and fur­ now getting big praise in the Soviet and method" of today's KGB "re­ ther promoted by Gorbachov. Yakov­ press. mains unchanged." lev was deployed to the United States Gorbachov's predecessor, Yuri Felix Dzerzhinsky, an ascetic, in the late 1950s, where he made his Andropov, for 16 years the KGB chief, aristocratic-bornPole , speaking to the firstcontact with Henry Kissinger and often cited and modeled his work and press in June 1918, minced no words Zbigniew Brzezinski.

EIR December 19, 1986 International 55 Middle East Report by Thierry Lalevee

Will Moscow really gain in Irangate? Also �eant for Baghdad to appre­ The Soviets have their own dirty secrets in the Gulfwar, and a ciate was the arrival in Jordan on Dec . 2 of General Chesnokov, the Com­ crisis looming with their closest ally in the region, Syria . mander in Chief of the Soviet Air De­ fense Forces, whose visit will lead to comprehensive military deals for the kind of weapons that Washington has been refusing to the kingdom. A At first, Moscow and especially its Islamabad axis. stronger Jordanis a major help to Iraq . Middle East troubleshooters were There was vague mention that The same goes for Egypt, which just overwhelmed by the revelations com­ Washington's game-plan is the "dis­ received Victor Dementsev of the So­ ing out of Irangate . After a few days, mantling of Iraq ," but the focus of the viet State Bank to renegotiate some $3 the Russian propaganda machine was article was its conclusion: "America is billion in debtfrom Nasser's era. Ru­ set into motion to demagogically blast asking for trouble." This probably mors abound that Moscow may grant Washington's "double-talk." On sec­ means the Soviets have decided to Cairo a debt moratorium. ond thought, Moscow became more reactivate their "right to intervene" into However, Moscow's real dilem­ cautious, not only because President Iran, in accord with the 1923 treaty. ma in the region concerns its closest Reagan had shown some abilityto deal The article fit several purposes. It ally, Syria. On Dec . 7, a Pravdaedi­ with the scandal, but because a scan­ portrayed Moscow as the old friend of torial accused the United States of dal in the West can affect the East, the "anti-imperialist" Arabs-Iraq and planning a "Grenada-type" military too. its allies; and it helped fuel Iran's in­ action against Damascus. It ended by A mid-November article in the ternalfaction fightin favor ofthe arch­ warningthat Moscow would stand by Sunday Times detailing how Moscow fundamentalists around Montazeri , Syria. The .real meaning of the edito­ had been doing exactly the same as who could now argue that the deals rial is elsewhere. Moscow knows that Washington, received much publicity with Washington were exposing Iran Syria is expected to face a serious cri­ in the Middle East. The article only to a most serious threat at its borders. sis by the end of the year, and preemp­ scratched the surface of Soviet du­ Meanwhile, Moscow gave a green tively wants to blame it on Washing­ bious dealing in the Gulf war. No one light for upgrading Soviet-Iranian ton. has yet really looked into the Soviet­ economic ties. On Dec. 9, Konstantin Damascus faces three problems. Vietnamese connection to the Ameri­ Katushev, chairman of the Soviet State Though limited, the sanctions im­ can-Iranian deal. It is a mere matter of Commission for Foreign Economic posed by Britain and the European time. Relations, arrived in Teheran to chair Community against Syria for running Pending the December arrival in the Soviet-Iran grand economic com­ terrorism have a grave economic and New York of a Soviet delegation from mission, the first such meeting in six psychological impact. Syria is facing the IMEMO think-tank, which will years. Deputy Foreign Minister Yuli its worst economic crisis ever. This meet with the Council of Foreign Re­ Vorontsovstarted a roundof meetings was admitted on Dec. 2 during a spe­ lations to analyze the consequences of with the Iranian ambassador in Mos­ cial meeting of the People's Assem­ Irangate, Moscowhas decided to crank cow, Naser Nobari, on Nov. 19, and bly, which reviewed the food short­ up its propaganda and diplomatic ac­ exchanged letters with Foreign Min­ ages and the paralysis of industrial tivities in the region. ister Ali Akbar Valayati, who will go production. Syria's isolation has The firstsigns were given on Nov. to Moscow in early January. sparked a new round of faction fights 26 by a long political analysis of the The Soviets have been making in the top ranks of the leadership. De­ Gulf war in the weekly Literaturnaya similar gestures to Iraq . In mid-No­ fense Minister Mustafa Tlas has seized Gazeta by Mideast expert Igor P. Be­ vember, they delivered new Badger the opportunity to urge the removal of lyayev, a long-time crony of IMEMO long-range bombers which were cru­ Hafez al-Assad's confidant, Gen. Mo­ director Yevgeny Primakov. Titled the cial to the Iraqi bombardment ofLarak hammed al-Khouli. Moscow has to "Iranian gambit," the analysis at­ Island. On Dec. 9, Foreign Minister ponder what it can do to save Assad's tacked American-Iranian dealings, and Shevardnadze talked of upgrading neck without creating a crisis which warned that Washington wanted to military and diplomatic ties with the will simply help President Reagan to reintegrate Teheran into an Ankara- Iraqi ambassador, Saad al-Faisal. divert attention from Irangate.

56 International EIR December 19, 1986 DatelineMexico by Josefina Menendez

Mexican 'Big MAC' suggested to Japan ery and tools, textiles, and cellulose FelixRoh atyn, the wizard who "saved" New York City, has a and derivatives. The public sector plan/or Mexico-and the narcobankers love it. would also partially withdraw from areas such as steel, metalworking, au­ tomotive vehicles, and sugar. It is also reclassifying 36 petrochemical prod­ ucts from primary (which will contin­ 'A rarely-seen fu sion between and finance industrial operations in ue in the hands of Pemex) to second­ government and national private en­ Mexico, mostly the export-oriented ary , which can be privatized. terprise, not seen for many years," was sweat shops called maquiladoras. The 70 Mexican businessmen on observed by Mexican commentators Rohatyn suggests that to finance the trip who were so exhilarated by during President Miguel de la Ma­ these projects, the World Bank should Gonzalez's speech came largely from drid's Nov. 29-Dec. 3 visit to Japan. form a 50-50 partnership with Japan. the states just south of the U.S. bor­ Felix Rohatyn, directorof New York's Japan would be strong-armed into put­ der, which are the cradle of the Na­ Municipal Assistance Corporation ting up some $50 billion of its "surplus tional Action Party (PAN) insurrec­ (MAC) and partner in the Lazard dollars," on the argument that the U.S. tion. Many of them were the "narco­ Freres investment bank, took the oc­ provided Japan with security for the bankers" whose banks were expropri­ casion to propose preventing "the vir­ past 40 years, so "Japan should be ated by ex-President Jose L6pez Por­ tual destruction of the Mexican econ­ willing to make such an investment." tillo in 1982, because they were kill­ omy and the resulting political crisis," The proposals made by the busi­ ing the nation with dirty-money laun­ using, of course, Japanese capital to nessmen in de la Madrid's entourage dering and flight capital. do so. seem inspired by the MAC concept, They have been financing the PAN The article Rohatyn placed in the while reflecting the monetarist sec­ electoral campaigns in the north of Wall Street Journal is not far from the tors's grip on the Mexican govern­ Mexico to create a political base for truth. He says that Mexico's political ment. Claudio X. Gonzalez, president cross-border maquiladoras and dope and social cohesion is at stake, that of the Business Coordination Council, traffic-easy money to pay the debt. politicaldisi ntegration has already be­ defended the economic policies the de De la Madrid has adopted their "eco­ gun, that the ruling PRI party is be­ la Madrid administration has held onto nomic liberalization program." That coming totally factionalized, and that doggedly against wind and tide. He explains why the monetarist business the result could be a civil war which praised the opening to foreign trade, clique used the Japan trip to proclaim could provide opportunities for the cutting down of the public sector, au­ their new-found adherence to the re­ Soviet Union. All this flows from the diting of finances, the progressive gime. deep economic crisis overwhelming abandonment of subsidy systems and To attract the Japanese into Ro­ Mexico. internal price controls, and the elimi­ hatyn's "save Mexico" trap, de la Ma­ Very far from the truth are the re­ nation of the overvaluationof the peso. drid announced the great flexibility of sponses he suggests to avoid such a It was shocking that the chief of the foreign investment law which disaster. Rohatyn proposes a "Big the Business Coordination Council­ would open up opportunities for the MAC" like the one he set up to "res­ and not, for example, the minister of Japanese. For the first time, foreign cue" New York. The bottom line is industry and trade-was the one who investors will be able to own 100% of that private businessmen would take announced that the public sector is the shares in "medium and small" the nation's financesin hand and force rapidly being trimmed. He said it is businesses. the state to support them. In the Mex­ getting rid of state sector companies What remains to be seen is wheth­ ican version, the proposal calls for pri­ which have no reason for existence. er Japanese investors, who tradition­ vate U. S. and Mexican interests to There are only 744 left; but the projec­ ally prefer truly productive invest­ form a "temporary" development au­ tion is to reduce them to 502 before ments, especially great development thority, which would buy up to $20 the end of 1988. Gonzalez announced projects, will accept participation in billion of Mexican debt paper from that Mexico would eliminate its hold­ an investment scheme which, in the U.S. banks, issuing bonds in return. ings in secondary petrochemicals, end, will only help to save the Wall In a second phase, it would reorganize chemicals, pharmaceuticals, machin- Street bankers .

EIR December 19, 1986 International 57 International Intelligence

in April respecting measures against Libya. Foreign AjJa irs, under the title, "The Soviet Hayden says Pacific The communique said the EC I 1 would Pretense ." needs Un ited States present the document to foreign ministers so "Even if Gorbachov's domestic initia­ they could take "more informed , effective, tives succeed far beyond any presentexpec­ and concerted action at the political level to tations, the Soviet Union will remain poor Australia's Foreign Minister Bill Hayden stop terrorist activities." and backward. The Soviet Union is not com­ said today that Australia places prime im­ Hurd said the paper would also be given petitive with the advanced Western econo­ portance on its security relationship with the to the United States as part of better coordi­ mies, and shows no signs of becoming com­ United States, and New Zealand cannot ex­ nating efforts . petitive in this century or beyond." pect Australia to be a substitute security He continues: "By speaking with some partner. candor abOut the facts of Soviet socip.ty, Hayden, in New Zealand for a four-day Chinese marry Gorbachov may help all of us see how we official visit, told journalists on his arrival ought to revise our image of his country." that Australiacompletely disagrees with New fo reigners, leave The problem with Gorbachov's candor, Zealand's ban on port and air access for Kaiser says, is that it may "dispirit the So­ nuclear-capable weapon systems and ap­ More than 22,000 foreigners have married viet public, reinforcing the cynicism that is pealed to New Zealand to restore normal Chinese since 1984, a sharp increase over already strong in Soviet life." access. Hayden is scheduled to meet Prime previous years, the New China News Agen­ Minister David Lange and will discuss the cy said Dec . 10. It gave no detailed figures, bilateral Closer Economic Relations (CER) but attributed the rise to the "open-doorpol­ agreement and mutual strategic interests in icy" which began in 1979 and "the increase Philippines' Ve r the South Pacific. of communications between China and the Hayden said New Zealand had benefit­ rest of the world." comes under U. S. probe ted from the CER agreement through in­ A government survey this year showed The u.s. Marshals Service said Dec . it creased exports and a larger market. How­ that many Chinese women marriedfore ign­ 10 is investigating the whereabouts of Gen. Fa­ ever, he said a significantnumber of Austra­ ers to get out of the country , and they ad­ bian Ver, after a judge issued an arrest war­ lian manufacturers was hostile to the 1983 mitted that love was often a secondary fac­ rant for the Philippines Army chief of staff agreement and the relationship needed to be tor: under the deposed Ferdinand Marcos. handled with care. The survey said more than 95% of The warrant was apparently issued after Chinese marrying foreigners were women Ver failed to appear in early December be­ and up to 99% left to live abroad. One fore a grand jury in Alexandria, Virginia, Chinese, a writer, said he married an Amer­ probing possible corruption in U.S. arms Greece rejects secret ican student in a remote city in northeast deals with the Philippines. William Demp­ China, where officials were less strict in in­ sey, a Marshals Service spokesman, said EC terror protocol specting the necessary documents than in Ver was cited for contempt of court. Others Peking. European Community interior mInIsters who have been subpoenaed include the meeting in London adopted a secret paper youngest daughter and son-in-law of Mar­ Dec . 10 identifying and analyzing the threat Wa shington Post, CFR cos; Imelda Marcos's brother; a wealthy posed to the EC by terrorism, but Greece Marcos business associate; and a former refused to associate itself with the docu­ deny Russian threat Philippine ambassador to the United States. ment. General Ver allegedly took partin a plan British Home Secretary Douglas Hurd The Soviet Union is poor and backward and to keep U.S. officialsfrom learning that U.S. said the document marked a new departure no military threat at all , claims an Eastern weapons being sent to the Philippines by for the EC in that it named the main areas Establishment spokesman linked to the Israel were then being transshipped to Iran , from which the terrorist threat originated Washington Post and the New York Council according to the San Francisco Examiner. and the central organizations involved. "It's on Foreign Relations. The paper quoted a Justice Department a big move forward from exchanging bits of "Gorbachov has given us a new oppor­ source saying Ver signed false "end user intelligence to an analysis of the main sources tunity to redraw our image of the East-West certificates" in late 1985 and early 1986 in­ of terrorist threats to Europe, " he told a news confrontation," says Robert Kaiser, assis­ dicating that the arms were being delivered conference. "It is a very specific and hard­ tant managing editor of the Washington Post. to the Philippines. The false certificates were headed document. " "As he implicitly acknowledges, we are not presented by Israeli officials to the depart­ In November, Greece had refused to join dealing with two equivalent giants." Kaiser ments of State and Defense to hide the true . EC actions against Syria, and refused again was writing in the New York CFR 's journal , destination of the weapons.

58 International EIR December 19, 1986 Briefly

• SEN. EDWARD KENNEDY will not be permitted to visit Poland as planned, said Polish government spokesman Jerzy Urban. "The sena­ tor's visit to Poland, no matter what The plan was known only to a few senior and developing the world socialist system. his intentions are, is not possible be­ White House officials and was devised to It follows from the recognition of the diver­ cause of the overloaded schedule of keep Secretary of State George Shultz and sity of the revolutionary process that no par­ previously planned political events," Secretary of Defense Caspar Weinberger ty has a certificate to the absolute truth." Urban told reporters. from knowing about the shipments. Renovica was the first Yugoslav party leader to visit Moscow since the late Josip • IGOR LATYSHEV, a senior Broz Tito in Renovica used his dinner 1979. member of the Soviet Academy of speech to speak of the need to observe "the Pope's peace message Sciences, said on Dec. 2 that the 1960 inalienable right of every party to determine revision of the Japan-U .S. Security stresses economic issue policy independently." Treaty invalidated a 1956 Soviet In the Nov. 29 issue of Pravda an olive promise to return the Hobomai and In his 1987 peace message, released Dec . branch was extended to another alienated Shikotan Islands to Japan Dec. 2. The 11, Pope John Paul II attacked development communist nation, Albania. "The Soviet Soviet promise, partof the Joint Dec­ programs which he said forced recipients to Union now resolutely advocates respect for laration restoring diplomatic rela­ accept contraception programs and abortion the autonomy of parties and the indepen­ tions between Japan and the U.S.S.R, as the price of economic growth. The 20- dence and equality of states. It is against the after World War II, was abrogated page message will be delivered to heads of practice of extending ideological differ­ when Japanrenewed its security treaty state around the world. ences to the sphere of interstate rela­ with the United States in 1960. In it, the Pope also said that powerful tions ....The Soviet Union resolutely ad­ divisions had appeared between the "tech­ vocates the elimination of obstacles hinder­ JAPANESE PREMIER Yasu­ nological haves and have-nots." He called • ing the normalizationof relationsand a joint hiroNakasone hasbeen invited tovisit for greater sharing of technological ad­ quest to restore relations. " Yugoslavia. Nenad Bucin, head of vances and a refusal to make Third World the Socialist Alliance of Working countries "the testing area for doubtful ex­ People of Yugoslavia, visiting in To­ periments or dumping ground for question­ Hashemi linksMontazeri kyo, delivered the invitation. able products." He also said, "Disarmament and development are vital for peace." to arms running, murder • WALLIS SIMPSON, the late The Pope begged terrorists to give up Mehdi Hashemi, a relative of Khomeini's Dutchess of Windsor, left Britain in violence, even if their cause was just, saying fear of her life , writes Nancy Dug­ that terrorism "undermined the very fabric hand-picked sucessor, supposedly con­ fessed on Dec . to murder, hoarding weap­ dale, whose husband Thomas was of society ." 9 ons, and collaborating with the Shah's se­ Prime Minister Baldwin's private cret police, according to official Teheran secretary during the abdication crisis Kremlin olive branches radio. Hashemi said the base for his activi­ of 1936. One entry , from Dec . 3, ties was the officeof Hussein Ali Montazeri , 1936, reads: "Mrs. Simpson left the to Yugoslavia, Albania the Ayatollah Khomeini's probably succes­ country today by car, becauseshe had sor. becomereally frightened for her own Mikhail Gorbachov, in what are described The interview with Hashemi, aired by skin. She had been informed that the as conciliatory remarks to Yugoslavia's Radio Teheran Dec. 9, quoted him as saying police could no longer guarantee her Communist Party chief Milanko Renovica he is gUilty of "gross deviations," including personal safety if she stayed in this in Moscow Dec . 10, said that the Soviet "standing up against the Iman of the Islamic country. " No further details given. Union observed Yugoslavia's development nation." without prejudiceand believed that all com­ Hashemi, described as former head of • LEV RYABEV was appointed munist parties must respect each other' s ex­ Iran's Global Islamic Movement, responsi­ Soviet minister of medium machine­ perience, the Soviet party paper Pravdasaid ble for exportingthe Islamic revolution, was building, Moscow's "warhead" min­ Dec. 11. arrested in late October and charged with istry , by the Supreme Soviet Presid­ Gorbachov quoted Lenin predicting that murder, kidnapping, illegal possession of ium Nov. 22. Ryabev has served as 'theworld would see many different attempts firearms and explosives, forgery , and en­ deputy chief engineer, deputy direc­ to build new societies on Marxist lines and gaging in unspecified "underground opera­ tor, and director of the Scientific Re­ a definition of socialism should include all tions." The Information Ministry says all search Institute of the Ministry of of them . charges against Hashemi have beenproven. Medium Machine-Building. From "It is hard to overestimate the funda­ The Ayatollah Montazeri said Dec. 10 1978 until 1984, he was head of the mental political importance of this thought that Hashemi "was in no way involved in Communist Party Central Committee of Lenin's for the process of establishing my office." science-engineering "R-Sector. "

EIR �ember 19, 1986 International 59 �TIillInvestigation

Fidel Castro's friend Ve sco aids the Contras

by Gretchen Small

I America to Soviet-run narco-terrorists struck with the Soviet "If [Nicaraguan chief] Daniel Ortega had no Contras , he Union by Jimmy Carter's Trilateral Commission govern­ would have to invent them," Costa Rican President Oscar ment. Carter administration officialsspoke of perpetual war­ Arias told Washington reporters on Dec. 5, during a two-day fare in Central America, and argued that the United States visit to the U.S. capital. Arias urged the Reagan administra­ could not allow any faction-"left"or "right"-to win . Cen­ tion to take more interest in the countries of Central America, tral America's militaries were cut off from U.S. assistance, particularly their economic problems, if the region is to be and control handed over to Istaeli arms- and drug-running protected. Not only have the Contras not weakened the Ni­ networks under the Carter administration-policies contin­ caraguan threat, but they have provided the Sandinistas "a ued under the Reagan presidency by means of the Contras very good excuse to make Nicaragua a more dictatorial re­ policy. gime," he argued. Even the most ardent Contra supporters do not argue that Investigations into the Contras' logistical support appa­ the Contra irregulars are a mHitary threat to a Sandinista ratus exposed in the ongoing Iran-Contras scandal, prove, regime kept well armed by Moscow. Neither is the argument however, that Daniel Ortega's international friends did in­ that the Contras will force the Sandinistas to the negotiating vent the Contras. In fact, with the identification of the Swiss­ table credible. A",Costa Rican President Arias emphasized, based "financial consulting" outfit,Compagnie de Services the Contras only provide the Nicaraguan regime with the Fiduciaires, S.A., as a center of Contra supply networks, it "foreign threat" they need to I, quiet rebellion against their is proven that the financial empire of one of the Sandinistas' uneasy rule. What is its purpose, then? top financiersand benefactors, narcotics finance king Robert The Contras policy is designed to keep the United States Vesco, sits at the center of Contra operations. from adopting a strategy that could stabilize Central America The implications of the Iran-Contras scandal go much permanently, plain and simple. The basic principles of such deeper than a case of "ripping off the ayatollah" to finance a policy require that the United States: Nicaraguan "freedom fighters," further even than violations 1) Build up the countries in the region, both militarily of the law banning U.S. officials from arming the Contras and economically. Here, debt relief and construction of infra­ during 1983-85. What EIR has reported since 1981, when structure are the required pillars of an economic strategy U.S. intelligence firstset-up the Contras, has been confirmed designed to defeat the narcoterrorists. in spades: The Contra operation was cooked up, not by Pres­ 2) Lead a military assault 'on the narcotics trade which ident Reagan, but by the friends and assets of Moscow in the provides the infrastructure for all terrorist insurgencies in the West, centered around the international narcotics trade . region. Here, the United States can provide the militaries of allied countries in Central America the logistical, technolog­ A Trilateral Commission policy ical, and intelligence support necessary to crush the drug From the beginning, the Contras policy was designed to networks. provide a "conservative" cover for the sell-out of Central 3) Let the Contadora countries, supported by the reacti-

60 Investigation EIR December 19, 1986 vated Central American Regional Defense Council (Conde­ apples in the Contra barrel. Robert Vesco, the fugitive Amer­ ca), provide the larger regional frameworkrequired for long­ ican financier running Carlos Lehder's cocaine trade today termeconomic and political development. fromthe comfort of Havana, Cuba, has laughed at that one­ This is the policy against which Assistant Secretary of all the way to the bank. State Elliot Abrams has been the most outspoken. Abrams Take the case of the Compagnie de Services Fiduciaires, argues against a policy of con' 'ining Nicaragua "through a S.A. (CFS), a Swiss "consulting firm"on fiscal and financial combination of economic, politJ,,;a1, and military support for matters. Located at No. 3 Thury in Geneva, CFS shows up its neighbors, and a diplomatic and economic quarantine of repeatedly in the Iran-Contras scandal. Identifiedas the shell Nicaragua itself," the Baltimore Sun reported on Dec. 5, company used to transfer the profitsfrom sales of U . S. arms because, he says, the United States does not have the "staying to Iran to bank accounts used by the Contras, CFS was then power" to win. identified as the company runningfinanc ing for several cov­ In June, Abrams stated outright that his policy is to limit ert operations of the "208 Committee." The plane used by the military capabilities of Ibero-American nations, even un­ former National Security Adviser Robert McFarlane in his der the currentconditions of escalating narcoterrorist warfare secret goodwill visit to Iran, was owned by New York Re­ across the continent, a message he delivered in a speech to public Corporation Transport Services, S.A., a company the Inter-American Defense Board . The "enlargement of mil­ itself owned jointly by CFS and Edmund Safra's Republic itary forces" in Ibero-America "threatens civilian institu­ National Bank in New York (where CFS maintains some tions," he stated, a doctrine straight out the heyday of Cart­ accounts). erdom and quite to Daniel Ortega's liking. A CFS subsidiary , CFS Investments in Bermuda, pur­ Under EIR's strategy, the United States wins allies in the chased planes for the Contras. Located at the same address processof kicking the Russians and the mob out of the region. as CFS in Geneva, is an office of Stanford Technologies Under the Carter-Trilateral-Contras policy, the crisis wors­ International Trading Group, a company run by Iranian­ ens, until the point that the United States must send its own American arms dealer Albert Hakim and retired U.S. Air troops in, in battle against populationswhich view our nation Force Maj.-Gen. Richard Secord. Stanford Technologies as a leading cause of their misery . handled many of the Contras international operations, with The creators of the perpetual-war strategy now speak of Secord identified as Lt.-Col. Oliver North's "executive agent" "reforming" the Contras, to save the policy behind it. The on Contra resupply operations from EI Salvador (the route Contras must now be prepared for "long-term guerrilla war­ exposed when the Sandinistas downed a plane carrying weap­ fare . The model is EI Salvador's leftist guerrillas," the Chris­ ons to the Contras on Oct. 5, and captured Eugene Hasenfus), tian Science Monitor reported Dec. 10, as the consensus which was run by a team from Stanford Technologies, in­ developing among the administration's Central American cluding retired Air Force Col. Robert Dutton. "analysts"! The unraveling of the truth of who runs the Contras as The Zucker connection lrangate proceeds, provides the United States an opportunity Who runs CFS? Swiss lawyer Jean de Senarclens is pres­ to dump the liberals' policy of bleeding Central America on ident, with the company's general director, Willard Zucker, behalfof a strategic deal with the Soviet Union, whose uli­ playing a leading role (including directing CFS' subsidiary mate aim was to see U.S. troops leave Europe to fight per­ in Bermuda). It is Zucker who leads the operation straight petual, no-win wars in Central America. back to Robert Vesco. In the late 1960s, Zucker joined BernieCornf eld' s Inves­ Vesco's mob and the Contras tors Overseas Services, running the legal department of lOS Accusations that the Contras trafficin narcotics have been and, for a time, serving as an lOS director. Zucker came from raised periodically. On Nov. 27 , Honduran police caught the the New York law firm, Willkie, Farr & Gallagher, where he main army of the Contras, the Nicaraguan Democratic Forces had been a partner, and soon proved to be part of an advance (known as the FDN), red-handed in the business. When po­ team for Robert Vesco's 1971 takeover of IOS . Willkie, Farr lice raided a marijuana farm set up near an FDN camp at & Gallagher, in fact, ran Vesco's raid, and subsequent loot­ Capire, three Nicaraguan Contras were found and arrested ing of lOS, under the direction of the firm's leading partner, for running the farm , along with two Hondurans. One of Kenneth Bialkin. As EIR documents in its bestseller, Dope, those arrested, Pastor Rivera, confessed that he was a military Inc., Bialkin and Wilkie, Farr& Gallagher introduced Vesco intelligence operative of the FDN, the largest Contra military to top Israeli mobster Meshulam Riklis, who provided Ves­ group, which, until this, had claimed any drug connections co the stock he used to take over lOS, from which, in tum, were limited to other factions in the Contras , centered in Vesco made the initial capital off which he built his Carib­ Costa Rica. bean narcotics and dirty money empire. Each time the narcotics accusations have come up, U.S. Zucker left Investors Overseas Services to found CFS, officials associated with the Contras have stated that, ifany shortly before Vesco's looting collapsed its global financial drug connections exist, the problem is limited to a few bad pyramid. Some say CFS is in fact the continuation of lOS's

EIR December 19, 1986 Investigation 61 operations, under new cover. "through"the Honduran military. CFS is only one track of the Vesco-Bialkin mob control The Pia Vesta anchored off Peru's shore in June, but over the Contras. Gen. John Singlaub, the Contra's leading never contacted port, before heading back to the Panama private fundraiser, works closely with Bialkin's Anti-Defa­ Canal. Spokesmen for the Danish company handling the mation League. Bialkin chaired the ADL for years , until he shipment, the Copenhagen Shipping Co., APS , stated that stepped aside earlier this year when the publicity around his El Salvador was the final destination. Soon thereafter, from dope-connections threatened to sink the ADL entirely. Ac­ Miami, a reputed CIA-linked arms dealer, David Duncan, cording to his own account, Singlaub brought in the ADL to announced that he had bought the weapons from the East "clean out" the World Anti-Communist League when he German state trading company. Panamanian investigators took over as chairman. Singlaub turned over WACL mem­ then confirmedthat the weapons were to be shippedfrom El bership lists to the life-time socialist who heads the ADL's Salvador to the Contras, using the route later exposed as that Fact-Finding Division, Irwin Suall, for Suall to decide which runby Secord's Stanford Technologies. groups to purge fromWA CL! Perhaps most telling was that 250 tons of Soviet weapons Vesco and the ADL, in tum, are part of the mafia that had been found in the Western Hemisphere, and the U.S. includes Israeli cabinet minister Ariel Sharon, another prin­ press and intelligence kept silent! A July 18 Wall Street cipal in the formation of the Contras . EIR's March 1, 1986 Journal article on Oliver North's work with the Contras hint­ Sp ecial Report, "Moscow's Secret Weapon: Ariel Sharon ed at the reason why. "North's work had risks. It is full of and the Israeli Mafia,"details the Soviet ties of this extensive secrets which are very dangerous to reveal; for example, the international dope and arms network. (In that report, EIR identity of the people who are providing East bloc arms to reports the connections of Elliot Abrams, assistant secretary the Contras," the Journal wrote. of statefor Inter-American affairs,to this Israeli mob. Abrams, Maybe North argued here, too, that he was dealing with who likes to brag that he runsthe Contras, is a memberof the "moderates" within East Germany. As for East Germany, so-called covert operations "208 Committee," and chairs the government officials admitted the money for the arms came Interagency Group on Central America, of which Lt. -Col. from Switzerland, but dismissed the matter as "a commercial Oliver North was also a part. So much for Abrams's talk of transaction." (U.S. officials told AFP that "not much worry "reforming" the Contras .) existed over a shipment of arms which went from one banana As is now public knowledge, as secretary of state, Alex­ republic to another. ") ander Haig gave principal responsibility for the arming, New files opened by the CFS and related investigations training, and financing of the Contras to Sharon's Israeli demonstrate that Soviet bloc involvement in the Contra op­ mob, an arrangement sealed in a secret accord signed by Haig eration was not limited to the Pia Vesta case. Secord and and Sharon in 1981, when Sharon was defense minister of Hakim themselves come out of a Soviet-contaminated net­ Israel. Under those agreements, Israeli armstraffickers began work within U.S. intelligence. Hakim and Secord werelong­ shipping weapons and supplies to the Contras, through cor­ term associates of Edwin Wilson, as were several other ruptedelements of the Honduran armed forces. In his Decem­ agents directing field operations of the Contras. When Wil­ ber 1982 visit to Honduras, Sharon established direct rela­ son was tried and convicted of selling weapons to Libya in tions with the chief Honduran running this network, then 1983, Secord testifiedon Wilson's behalf at the trial. Wilson, Defense Minister Gen. Gustavo Alvarez. Alvarez was later with his now-fugitive partner, Frank Terpil, were report­ dumped from the Honduran military , on charges of corrup­ edly both employees of Stanford Technologies at one time. tion which included his association with Honduras's military In the early 1970s, Albert Hakim had been implicated in attach� in Chile, Gen. Jos� Bueso.Rojas, who had been im­ smuggling computer technology to Warsaw Pact countries, plicated in a cocaine-trafficking ring! Today, both Alvarez when both he and another associate, David Shortt, were, and Bueso-Rojas are "private" advisers to the Honduran­ respectively, the Iranian and Austrian representatives of based Contras. Hewlett Packard. Following U.S. government investigation for illegally shipping HP computer systems to Czechoslova­ Soviet connection to be investigated kia, Shorttformed an Iranian-based firmwith Albert Hakim, Soviet assistance to the Contras was first revealed last dedicated to selling advanced technology to Russia. summer when the Danish ship, the Pia Vesta, carrying 250 The Dec . 3 issue of Tribune de Geneve revealed another tons of Soviet-made weapons, was stopped in Panama's track to be followed. The CFS-connected New York Repub­ waters. The weapons had been sold by the East Germanstate lican Corporation Transport Service, cited above, bought its trading company, and loaded in Rostock, East Germany at planes from another Geneva-based company, named Aero­ the end of Apri1 1986. The Pia Vesta carried two manifests leasing, which includes Swiss industrialist Peter Notz as a aboard, one showing the weapons' destination as the Peru­ top director. Notz is a close associate of Syrian intelligence, vian Navy, the other, El Salvador's military. Speculation and works with the Nazi terrorist controller Fran�oisGenoud, began that theweapons weredestined for the Contras, shipPed whose controlling role in protecting Soviet-directed Arab "through" El Salvador's military, as Israeli weapons passed terrorism has been documented by EIR .

62 Investigation EIR December 19, 1986 edby a similarAIDS outbreak. Washington officialsare said to be examiningthe possibility thatCuban exiles advising the Contras brought in thedisease . The major Contra base of operations is located in Hon­ duras, like Nicaragua an extremely impoverished country. Thousands of U.S. soldiers have beenrotated through Hon­ duras in the past three years, building up military operations AIDS outbreak in to back the Contras. Honduran papers have repeatedly com­ plained of widespread promiscuity among American sol­ diers. Nicaragua, Contras Leading the foreign mercenaries brought in to advise Contra militaryoperations are Cuban exiles, many from the The Sandinistagovernment faces' a terrible outbieak of AIDS old Brigade 2506made famous in the CIA's attempted Bay in Nicaragua,informed sources in Washington, D.C. report­ of Pigs invasion in 1960. While Brigade 2506includes Cuban ed in early November. According to the reports, recently patriots, others in it were recruited from the drug-running published in New Solidarity newspaper, Sandinista officials gangsters who ran Batista's Cuba and were disgruntled at are attempting to determine how far the killer disease has losing the franchise over the "pleasure haven" that was Cuba spread through their ranks, without letting the news leak to under Batista. This wing of the Cuban exile movement, which the general public. used its proclaimed "anti-communism" as a cover to infiltrate Promiscuous sexual practices were inculcated in Sandi­ U.S. security operations, is so penetrated and counter-pene­ nista ranks as proof of commitment to "revolutionary free­ tratedby Castro's Cuban intelligence, the DGI, that it is an dom," even before the guerrilla group seized power in 1979 open question where their loyalities lie. withthe help of the Carteradministration. Castro's DGI and the old Batistacrew meet in the South "Intellectual" controllers of the Sandinistas, such as Jes­ American-U.S. drug trade, where the "Cuban mafia" has uit Father Fernando Cardenal, promoted "eroticism" as a held a longtime franchise. DGI penetration of this Cuban centralpart of Sandinista ideological training, while Carden­ exile mafiawas upgraded in 1981, when some 120,000 Cu­ al's brother, the Trappist monk Ernesto, is famous for having ban "exiles" were dumped into the United States by Fidel organized orgies at the Sandinista training center on the Isle Castro, through the Mariel boatlift. Thousands of criminals, of Solentine in the 1970s. homosexuals, drug-users, and social misfits enteredthe United Once in power, the Sandinistas have relished their new States at that time, as Castro emptied Cuba's prisons onto role as the little brown darlings of the "radical chic" interna­ U.S. shores, under the cover of letting "dissidents" leave. tional jet-set. Bianca Jagger, ex-wife of Rolling Stones star U. S. law enforcement agencies have recognized the Mar­ Mick, cavorts with the Sandinista leadership and with the iel operation as a cover for infiltrating into theUnited States wife of Nicaraguan President Daniel Ortega. Ortega made hundreds of Cuban intelligence agents specializing in espio­ quite a scene during his visit to New York last fall, attending nage and sabotage activities. Once in the United States, many a party of the Peter, Paul, and Mary "folk-singing" group, of the DGIagents tookup command postsin the South Amer­ and spending $3,000 on designer glasses! ican-U.S. narcotics trade, joining some of the Cuban exiles The Sandinista Armed Forces magazine plays up the sex­ now involved in drug-trafficking. ual life of the troops, reportingthe adventures of their soldiers Unnoticed before was the danger of AIDS, which was as following in the footsteps of their founder, Augusto San­ then only beginning to come to public attention, as the slow­ dino, a memberof the theosophy cult who vaunted his sexual incubation virus struck down its first victims. Since then, exploits. medical investigators have established that the thousands of Sandinista promiscuity, combined with economic dev­ Cuban homosexuals sent in the Mariel boatlift-including astation in Nicaragua, created ideal conditions for transmis­ homosexual Cuban soldiers discharged from service in An­ sion of the AIDS virus.News of the epidemic could spark a gola, where the epidemic is raging-brought the killer dis­ revolt among Nicaraguans, already angry at Sandinista at­ ease with them to the United States. tacks on Pope John Paul II and the Catholic Church in the The concentrations of the AIDS virusdeveloping around name of ''theology of liberation." Simmering anger at the the Nicaragua crisis, could create a holocaustof the scope of dictatorship has been limited by fear of the "Contras," seen that now sweeping Africa. Immunological resistance in the as foreign-controlled guerrilla bandits differing little from area is already low. Other epidemics are spreading from the Sandinista rulers. campsof refugees and displaced persons throughoutCentral America. Central American health and nutritional levels, u.s. soldiersinf ected? historicallylow , have plummetedto danger levels in the past Worrying Washington, however, is the danger that the decade, as the combination of civil war and International ranksof the U. S.-sponsored Contra fightersmay bedecimat- Monetary Fund austerityhas collapsedfood supplies.

EIR December 19, 1986 Investigation 63 �TIillNational

'Irangate' sparks policy shifts, NSC clean-up

by Jeffrey Steinberg

While the congressional "Irangate" hearings were grabbing administration. This "deeper" housecleaning was the subject headlines, informed sources in Washington, D.C. ascribed of a nationally syndicated column by Richard Reeves, pub­ far greater importto the quiet housecleaning begun by Pres­ lished in the Houston Post on Dec . 8. Reeves traced the ident Reagan's new national security adviser, Frank Carluc­ origins of the NSC's rogue elephant role to the tenure of ci. An experienced administrator with close ties to the CIA Henry A. Kissinger as national security adviser, stating: and Defense Secretary Caspar Weinberger, Carlucci lost no ". .. the Congress has to get tough and demolish or time in making personnel changes at the Old Executive Office rebuild the little secret house of the NSC. It really isn't a Building, bringing in a three-star general who had served as Reagan house. The principal architect was Richard Nixon's the senior military assistant to Secretary Weinberger, and national security adviser Henry Kissinger. What Kissinger announcing the likely appointment of another top Pentagon did was to construct a hidden back door to the White House. aide, Grant Green, to a post in his new office. Colonels no one ever heard of, beginning with Alexander Press reports say that Carlucci will thoroughly clean up Haig, slipped through that door to appear suddenly in the the NSC, replacing acting national security adviser Alton corridors of civilian power. Agents of all sorts slipped out on Keel, longtime Kissinger asset Peter Rodman, congressional secret missions that may have been known only to the colo­ liaison Ronald Sable, and Howard Teicher, the immediate nels. A secret cell within the government often playing the bossof Lt. -Col. Oliver North and the author of the disastrous White House off against the State Department and Depart­ Jan. 17, 1986 "intelligence finding" that argued for the exis­ ment of Defense. Henry Kissinger's backdoor led to Lt.-Col. tence of a "moderate" faction within the Khomeini regime. Oliver North's rat hole. Agents, weapons, and money began Teicher is widely viewed as part of an informal Mossad slipping through chinks to Tel Aviv, Beirut, Teheran, Te­ circle, linked to a faction of the Israeli intelligence service­ gucigalpa, Managua, and who knows where else ....What a circle which has been misguiding strategic estimates and does all this have to do with the American System on the policy deliberations at the White House, State Department, 200th anniversary of our Constitution?" Defense Department, and Department of Justice for years . While the Kissinger-instigated emergence of the NSC as Carlucci's new chief deputy is Lt. Gen. Colin L. Powell, a power center has been associated with the idea of an "Im­ the commander of the U. S. Army 5th Corp. , headquartered perial Presidency," exactly the opposite was true . Cut off in Frankfurt, West Germany . One of the highest ranking from more competent policy input and more experienced black officers in the U.S. armed forces, Powell is an Army clandestine capabilities at the Pentagon and the CIA, a Ranger, paratrooper, and a highly decorated veteran of the succession of Presidents has become increasingly enslaved Vietnam war. to an NSC staffed by Kissinger and Zbigniew Brzezinski While the personnel shakeup is significant, the purging clones and wedded to policies that would have the U.S. of the Kissinger and Mossad-contarninated elements is only concede Eurasian hegemony to Moscow's New Yalta "de­ the surface reading on an expected deeper change, in both tente" and foster the spread of an inherently anti-Western the structure and substantive policyorientation of the Reagan Islamic fundamentalism. Through this process as well, the

64 National EIR December 19, 1986 NSC became a prime point of influence of the Kissinger­ mark Corp., a new defense corporation chaired by Admiral linked Israeli circles of Ariel Sharon. Bobby Ray Inman, and including Donald Rumsfeld and Drew Carlucci will now, according to a range of Washington, Lewis on its board. D.C. sources interviewed in the preparation of this article, preside over the downgrading of the NSC to its originally Special relationship finished conceived role of facilitating broader policy input from ex­ The second element emerging is the termination of the ecutive departments charged with national security respon­ perverse "special relationship" between Washington and Tel sibilities. In this long overdue reform-complemented by Aviv, which is fundamental to the more profound policy the Joint Chiefs of Staff's comeback as a strategic planning changes than even the Regan question. Architected by Henry body , particularly with respect to low intensity-unconven­ A. Kissinger and certifiedwith the secret clauses of the 1979 tional warfare-some of the deepest pockets of Mossad pen­ Camp David agreements, this "special relationship," instead etration of our national security establishment are expected of drawing on the best of the common, technology-proud and to be revealed. progress-oriented heritage of the United States and Israel, is Anticipating the deeper implications of the NSC shakeup based on a geopolitical notion of Israel as a "New Venice" and the appointment of Carlucci, syndicated columnists Ev­ conducting its diplomacy via arms smuggling, and within a ans and Novak wrote on Dec. 5 that Carlucci's first big test "New NATO" fe aturing a nuclear-armed Israel led by a dan­ will center around breaking the policy-estimates impasse on gerous lunatic, Ariel Sharon. It is no coincidence that this the recently discovered massive Soviet radar installation on "New NATO" plan was hatched by the same Kissinger-Brze­ the Polish border. With the discovery of the newly operation­ zinski faction that began the Islamic fundamentalist "arc of al installation on Nov. 10, it is clear that Moscow is on the crisis" game by installing Ruhollah Khomeini in power in verge of deploying a nationwide three-tiered missile defense Iran in 1978. This "special relationship" has begun coming system-its own SOL State Department and Arms Control apart at the seams as the result of a series of high-profile and Disarmament Agency analysts have tried to downplay media exposures in the United States. Many key features of this discovery, a flagrant violation of the 1972 ABM treaty, those revelations were the subject of an EIR news briefing in while DoD and CIA have argued that this poses a major threat Washington, D.C. in early December. of a Soviet thermonuclear-war breakout. • On Thursday night, Dec. 11, ABC-TV's 20/20 news Less than a week after the Evans and Novak column magazine aired exclusive interviews by Barbara Walters with appeared, Secretary Weinberger, speaking before the Amer­ Saudi businessman Adnan Khashoggi and Iranian arms mer­ ican Legislative Exchange Council in Washington, D.C. chant and "Irangate" middleman Manucher Ghorbanifar. Both blasted Soviet violations of SALT II and ABM, breaking the men provided damning evidence against Israeli intelligence administration's public silence on the Soviet radar break-out. and known U.S. Mossad assets for pushing the false notion that a pro-Western "moderate" faction of the Khomeini re­ Other trees are falling gime was prepared to deal with Washington. Both confirmed Two other elements of the unfolding exposures have stood that the Reagan administration relied predominantly on Is­ out in recentdays . raeli arms merchants Al Schwimmer and Jacob Nimrodi to The first is the continuing, now clearly bipartisan move­ provide the "bona fides" on Ghorbanifar, and that an Amer­ ment to dump White House chief of staffDonald T. Regan. ican with known, deep ties to the Sharon faction of the Mos­ During his open testimony before the House Foreign Affairs sad, Michael Ledeen, had been the initial "U.S. government Committee on Dec. 8, Robert C. McFarlane, former national official" detailed to Tel Aviv to get Israel's approval of the security adviser, pointed a finger at Regan as the "higher Iranian shyster. authority" at the White House who approved the diversion of • The very next day, the Washington Post devoted front­ Iran arms profits to the Contras while keeping the President page coverage to the fact that the Israelis had been the primary uninformed. sources drawn upon by CIA director William Casey in certi­ However, the Don Regan issue has moved far beyond fying a CIA intelligence estimate prepared by Middle East "Irangate" to a broad attack on the former Merrill Lynch specialist Graham Fuller in early 1985. Apparently, Fuller's CEO's management of the presidential office. Such terms as early report suggesting the "moderate mullahs" gambit was "incompetent," "egomanic," and "vindictive" were tagged based on contact between Khashoggi, Ghorbanifar, and a onto Regan. A parade of visitors descended upon the pres i­ former top CIA official, Theodore G. Shackley in Hamburg, dential living quarters at the White House to urge Mr. Reagan West Germany in late 1984 and early 1985. Shackley's meet­ to fire his chief of staff. Among the callers were Senators ings were reportedly known to Michael Ledeen before the Paul Laxalt (R-Nev.) and Howard Baker (R-Tenn.), former former aide to Alexander Haig traveled to Tel Aviv to see Secretary of State William P. Rogers, and ex-Democratic Schwimmer, Nimrodi, and David Kimche; Kimche is a for­ National Committee chairman Robert S. Strauss. Strauss has . mer European station chief of the Mossad and director gen­ recentlyjoined the board of the Austin, Texas based West- eral of the Israeli Foreign Ministry.

EIR December 19, 1986 National 65 Chicago semi-skilled workers standing in long soup lines . . . because they are being killed by the mayor's greaterconcern for Wall Street bankers and Gold Coast liberals who are more con­ cerned about • gay rights' than moral families." In her 1983 bid for mayor, Mrs. Jones and her science adviser, Dr. Robert Moon, professoremeritus from the Uni­ versity of Chicago and a physicist who worked on the Man­ hattan Project in the 1940s, wrote aproposal to reindustrialize the City of Chicago. This plan, which she hand-delivered to the Chicago City Council, included: 1) Reopening Navy Pier as an industrial site, for the purpose of encouraging trade deals with other nations around LaRouche Democrat the world in need of basic infrastructuralgoods, that Chicago had become so famous for producing, from the time of Frank­ sets mayoral program lin Delano Roosevelt's war mobilization; 2) Extension of the 63rd 'EI' train Delano Roosevelt's Every Illinois voter who witnessed "the shot heard around war mobilization; the world" caused by the March 18 Democratic primary vic­ 2) Extension of the 63rd 'EI' train line to Stony Island, tory of LaRouche Democrats Janice Hart for secretary of to 95th Street, on the .SouthSide, while simultaneously con­ state, and MarkFairchild for lieutenant governor,knows that verting this to' a high�spee'd; magnetic-levitation train, to the "Irregular Democratic Party" got caught with its pants facilitate the movement of peOpleand goods; down. This includes former senator Adlai Stevenson, Ald­ 3) Reopening and reinvestmentin the remaining crucible erman Ed Vrdolyak, Mayor Harold Washington, and the steel plants around Chicago, for such enterprises as above, Chicago Sun-Times and Chicago Tribune. as well as the emergency crash program to build the Cross­ Now, Lyndon LaRouche's Midwest collaborator, Mrs. town Expressway, which would open the entire state up to Sheila Jones, has accepted a mandate from the "forgotten over-the-road trucking and trade throughout the area; majority" to run for mayor of Chicago in the primary in 4) Urgent completion of the 'Deep Tunnel' project. a February 1987. Mrs. Jones, a life-long Democrat, ran for clean water system for the City of Chicago, which would mayor here in 1983, and was subjected to the most unprece­ involve thousands of re-employed skilled and semi-skilled dented violations of civil and human rights by the "Irregular workers, taking into account the related infrastructural goods Democratic Party," the Chicago media, and the League of needed for such an enterprise; Women Voters. Political observers in Chicago admit that had 5) Re-establishment of apprenticeship programs for high she been allowed her rights in that election, Chicago might school students throughout the city in basic industry, ma­ have had its first blackwoman mayor then. chine tools, electrical engineering, construction, mechanical A well-known civil rights leader, a former trade-union engineering, etc., to give fruitful and useful employment to organizer for the Milwaukee Teacher's Association in Wis­ our "dying" youth; consin, and a former educator, Mrs. Jones was the political 6) Establishment of a pro-scientific taskfo rce to review strategist for the Hart-Fairchildcampai gn, and over 100other the city hospitals, to deal with the re-emergence of a tuber­ Illinois candidates. Through that campaign, the controls put culosis epidemic, to reopen hospitals which have been closed on Illinois Democratic voters were shattered. Whether the down to offer maintenance care and containment of such "Irregular Democrats" can suppress her campaign this time­ diseases, as well as establishing highly skilled and equipped under growing national crisis conditions-is a very big ques­ research centers in such hospitals; tion. 7) A war on drugs, including the confiscationof 100% of all property and profits of drug money launderers and politi­ Creating productive jobs cians and law-enforcement agents who cover up, and are The main agenda of the Jones for Mayor campaign is to involved in, the proliferation of drugs in the city. create productive jobs. Mrs. Jones stated: "We are a city of tremendous potential wealth. This is How to fund it not the wealth of real estate speculators, who are forever Mrs. Jones is running on that platform, and has added building officebuildin gs, and condominiums, which the av­ several new planks for the 1987 mayoral race: • eragecitizen can't even afford, since he is out of workl due Instead of taxing Illinois's hard-working families and to the shutdown of U.S. Steel, vital cruCible steel factories, the poor, a tax on the Chicago Board of Trade; for every machine toolsho ps, brick kilns, and constructionfirms ." transaction, there would be levied a tax of 0.2%. This would She added, "We have extremely talented, skilled and bring a minimum of $6 billion a year into Chicago for rein-

66 National ElK December 19, 1986 vesting in neighborhoods and wards. tonian, two-tier system of taxing, which will encourage re­ • Emergency housing for the homeless-not flophous­ investment into machine tools, the steel manufacturing, and es-to be funded by confiscating drug profits and the Board manufacture of vitally needed capital goods for trade with of Trade tax . Zaire. • A "Protocol for Life," to establish research centers for As mayor, Jones would offer to purchase Zaire's copper AIDS, to be set up with the assistance of pro-life, pro-science products at parity price. The copper is needed, among other medical professionals being contacted nationally by Mrs. things, for Chicago's electricity grid. Mrs. Jones would or­ Jones. She sharply criticizes Mayor Harold Washington's ganize the Chicago City Council to encourage franchises for policy of allowing AIDS-infected children to attend public Chicago entrepreneurs to develop a hydrogen-based econo­ school and propagating the delusion that "condoms and clean my, to runcars and heat homes and factories. One of Chic a­ needles" are sufficientto avoid contagion. go's greatest resources is its access to fresh water. This tech­ • Implementation of the anti-austerity policy of Peru's nology would be made available to Zaire as well. President Alan Garda, of a debt moratorium for the City of The building of a new harbor at Chicago's Navy Pier, Chicago. which was already part of the Jones mayoral platform in 1983, will be critical to facilitate trade shipments from the A Zaire-Chicago industrial connection Midwest to Zaire. This is planned to be a deep water port In a statement released on Nov. 27, Sheila Jones an­ facility, to be used for ocean-going vessels. nounced her support for Zairean President Mobutu' s decla­ Jones says she aims to make Chicago the public transpor­ ration Oct. 30, that Zairewill no JO!1gerabideQy lnternatjonal tation showcase of the world, by building 300 miles of un­ Monetary Fund (IMF) conditionalities. She pledged to do all derground, magnetically levitated train systems. This tech­ in her power to build support for Zaire, a country in the nology could serve as a model for Zaire, while revitalizing African AIDS belt, which has joined Peru in deciding to Chicago's devastated building industry. She has pledged to allocate only 10% of its export earningsto debt payment. make available to Zaire the breakthroughs achieved by the Mrs. Jones commented that not only are President Mo­ medical research team she is assembling under the rubric of butu and the central committee of Zaire correct thatthe IMF "Protocols for Life." is tryingto recolonize Zaire economically, but that this is the IMF's plan for the world, as can be seen in the Davignon Need for economic justice Plan for radically reducing steel production capacity in West­ In her statement of solidarity to Zaire's President Mobu­ ern Europe and the United States. One of the clearestexam­ tu, Sheila Jones praised Reverend Dibala Mpolesha, a Zai­ ples is the once-great industrialized center, the City of Chi­ rean minister who has taken a leading role with the Schiller cago. Institute in fightingfor a New InternationalEconomic Order. Mrs. Jones has proposed that Chicago and Kinshasa, "St. Augustine condemned the spirit of exploitation of man Zaire become sister cities, and exchange representatives to which motivates the merchants of false witness. Therefore, I discuss proposedpro jects, for trade and infrastructural trans­ concur with Reverend Mpolesha in asserting that there must fer deals, dialogue and negotiations between the City of Chi­ be justice in competition and economic exchange with de­ cago and Zaire. veloped and industrialized nations, toward human develop­ Following the lead of Peru and Zaire, Mrs. Jones prom­ ment and the betterment of relations between persons and ised that her first act as mayor will be to declare a debt societies. Instead of exploitation, we must think in terms of moratorium for the City of Chicago, in order to begin the sharing, because man is a traveler on this Earth, and must put replacement and build-up of vital industry, which will be whatever he has to the benefit to others, who are likewise placed at the disposal of Zaire. created in the image of God." Then, Jones would establish a City Development Bank, Mrs. Jones continued, "I, too, would like to see the modeled on the one proposed by Abraham Lincoln in his underdeveloped countries fixthe price of their products them­ Program of InternalImproveme nts, for the purposeof under­ selves, and freelydo business with the clients of their choice, writing loans, to give credit to Third World nations, starting without intermediaries or constraints, and above all, receive with Zaire, for the infrastructural projects they need. The thefull share of the revenues to which they are entitled, for Chicago City Development Bank would also underwrite loans their internaldevelopment, which give so much to all inhab­ for Illinois agriculture, to facilitate food trade between Illi­ itants of this dear planet of ours. The themes of equity, nois farmers and Zaire. sovereign equality, interdependence, and common interest must be the basis of North-Southeconomic cooperation." Great projects are essential Mrs. Jones, addressing President Mobutu of Zaire, asks Since Chicago has lost 75% of its steel, 90% of its rail him to "accept the heartfelt intent of my offer, as the next car production, 75% of its machine tool production, and 20% mayor of the City of Chicago, the future Workshop of the

. of its auto production, Sheila Jones seeks to set up a Hamil- World!"

EIR December 19, 1986 National 67 not been one shelter built. Fu�hermore, we maintain a 60- day supply of ammunition in Europe, and the allies only have two weeks . So if a battle starts, we will be left holding the bag while the flanks collapse at the end of two weeks, and in Economic, military the meantime we bear the expense of maintaining all that extra ammunition ...." His so-called solution: Simply re­ crisis scares Dems duce the rate of production of military goods, and "pray for an arms control breakthrough." by Leo Scanlon Senator Gore, whose wife heads the Soviet-sponsored "Peace Links" organization, recommended that the nation reconsider SDI if the Soviets stop violating the ABM and The Dec . 11-12 gathering of the Democratic Leadership SALT treaties, and agree to reductions in offensive systems. Council (DLC), held in Williamsburg, the reconstructed cap­ Neither Gore nor Aspin had anything other than a shocked ital city of the colony of Virginia, offered the firstchance for silence when asked to comment on the explosive revelations the "moderate" Democrats to float the issues and strategies of Soviet ABM break-out made by Defense SecretaryCaspar they will take into the 1 9 88 election. The two days of discus­ Weinberger just hours before their panel in Williamsburg. sions and panel presentations revealed that this group of But other Democrats present stressed that defense is a top Democratic elected officials is beginning to react to some­ priority with the voters . Governor Hunt of North Carolina thing the LaRouche Democrats brought to the fore in the noted that he had always thought that "jobs was the issue we 1986 elections: This country is facing the greatest economic would rise or fall on, until the last election, when I saw the and military crisis in living memory, and any political move­ effect that a 30% difference between us and the RepUblicans ment which doesn't recognize this will have no access to the on defense had ...it killed us."To these desperate elected American electorate. officials, Sam Nunn appears, for the moment, to be "pro­ Organized and chaired by Charles Robb, ex-governorof defense." Virginia, the DLC is the think tank backing a group of pres­ idential hopefuls including Richard Gephardt, Sam Nunn, Wright: back to colonial America? and Joe Biden. It characterizes itself as the moderate wing of Texas Congressman Jim Wright, the new Speaker of the the Democratic Party . Unfortunately for the Democrats , the House of Representatives, offered a legislative agenda which principal military strategy document presented to the confer­ is motivated by his recognition of the industrial calamity ence, authored by Senators Sam Nunn (Ga.), Albert Gore which is the U.S. economy. His proposal centers on a. call (Tenn.), and Les Aspin (Wisc.), is a prescription for capitu­ for a bipartisan mobilization to rebuild the nation's industrial lation to Soviet superiority. capacity. "It is my great hope that the current shock of falling "Defending America, Buil ding a New Foundation for so suddenly and steeply behind in world markets will do for National Strength" is the ambitious title of the document all of us what Sputnik did in the 1 9 50s and Pearl Harbor did which re-hashes the worst features of the Packard Commis­ in the 1 940s, and we will use our inherent strengths of mind sion reforms, and echoes the structural proposals, most as­ and will to respond to the challenge." sociated with Gary Hart, which would make the U. S. military "We are losing our industrial base," he warned. 'The incapable of representing a threat to the Soviet forces arrayed American factory system and our system of renewing our against our European allies. productive capacity through machine tools has been declin­ Sam Nunn argued that the problem with U.S. negotiating ing. American agriculture ...is declining ...for the first policy at the MBFR talks, is that the discussion has ignored time since we were an infant nation stretched along the East­ the threat posed by the Soviet main battle tank, which Nunn ern seaboard, we are beginning to export raw products into asserts is just as deadly as an ICBM. So, Nunn proposed that other countries who make them into finished goods and sell we insist that the Soviets reduce their tank forces to a level at them back to us. That's not our destiny, that's the destiny of which they no longer pose a threat of invasion in Western a declining nation. I'm not ready to consign us to an ash-heap Europe! Unaffected by reality, Nunn went on to assert that of has-beens! he has discovered that the Europeans are advocates of nuclear "We now owe $200 billion of debt to other countries. weapons, as shown by their reluctance to undertake a buildup More important, we are selling raw products to be processed of conventional forces to offsetthe Soviets. and refined and manufactured into finished goods and re­ "We have problems of cooperation with the Europeans," turned and sold on our markets. That's the classic definition he raved. "For example, we negotiated an arrangementwhere of an undeveloped country, the definition of a colonial pos­ we would build a number of aircraft which would be stationed session, and we certainly do not need to come to Williams­ in Europe, and the allies were to build the shelters. Well, we burg to allow ourselves to be accepted as a colonial posses­ built and deployed the planes, and two years later there has sion!"

68 National EIR December 19, 1986 and Secretary Baker in this effort . All of us-the Congress, Documentation the administration, and the forces you represent-must join together if we are to be effective .... To this end, some of us already have had earnestconver­ sations with key officials in the Reagan administration, urg­ ing them to take a close look at the gruesome statistics and to reconsider their formerly intractable opposition to any and all trade legislation ... 'We are Our intent, our goal, is to make America competitive in losing our a world no longer composed of independent national econo­ mies. The flow of capital is international and uncontrolled industrialba se' today-perhaps even uncontrollable...... We need to ease export controls, invest in an edu­ Excerptsfrom a speech by Rep. Jim Wright (D-Tex.), Speak­ cational renaissance in which math, science and foreign lan­ er of the House, at the Democratic Leadership Conference guage instruction flourishes at all levels ... , Only some in Williamsburg, Va ., on Dec. 11-12. 54,000 young [students] graduated from American colleges and universities with degrees in scientific, mathematics, and The first imperative in the 1 000h Congress will be to come to engineering disciplines. Japan, with half our population, was grips with our American trade deficit and the steady decline graduating 77 ,000, half again more . Rus�ia was graduating in American competitiveness. This may be the dominant 300,000 people it calls engineers; while the nomenclature is economic issue for the remaining years of the 20th century. not anywhere near comparable, the fact is 'that they graduated The trade deficit-an estimated $170 billion in 1986-is 300,000 young Soviet citizens with some degree of techno­ the prime symptom of that failure, a failure.which has trans­ logical competence. We were graduating 54,000, and a great f ,rmed this nation in four shortyears from the world's largest many of those were exchange students from other countries, creditor nation to the world's largest debtor. We now are they were not American students. $200 billion in debt to other countries. And it certainly is no Another example might be the fact that Japan has in the accident that the rise in our trade deficit has coincided with United States today, and I don't see where this is a problem­ our poor performance in economic growth. I'm somewhat envious of them in this respect I suppose­ It has something to do , most certainly, with the decline Japan has in the United States today some 10,000 business in real wages. It is linked indirectly to the fact that the average representatives of Japanese firms, selling Japanese goods. 30 year old couple has a harder time today buying a home­ All of them speak excellent English, while by contrast the or even an automobile-than their parents had. United States has in Japan only some 500 representatives of Failure to deal with this crisis-to idle away precious American business firms, and only a tiny handful can speak time expecting it to correct itself-could doom future gen­ any Japanese at all. What does that tell us? It tells us that we erations of Americans to a steadily declining standard of ignore education at our peril, and we're foolish in the extreme living and eventual status ;is poor inhabitants of a once rich if, ignoring education, we then wonder why we are falling land. behind in world trade .... We are losing our industrial base, the American factory As you no doubt have observed, I believe that the federal system and our system of renewing our productive capacity government has a vital role to play in the battle to restore through machine tools has been declining. American agri­ America's productive capacity and America's competitive culture . . . is declining. . . . For the firsttime since we were advantage . But please do not assume that I think government an infant nation stretched along the eastem seabord , we are must play the only role or even the dominant role. Govern­ beginning to export raw products into other countries who ment's function is to create a climate conducive to suc­ make them into finished goods and sell them back to us. cess .... That's not our destiny, that's the destiny of a declining na­ The status quo is unsustainable. Time is much too pre­ tion .... cious to waste. Should we go into a recession, God forbid, . . ,Ifor one am not prepared to participate in the indus­ the pressures on the Third World and the major debtor nations trial and economic decline of this nation, nor to concede that could be immensely and perhaps even irreparably destruc­ our legacy must be confined to that of a service economy tive. which produces little, ... It is my great hope that the current shock of falling so I am prepared to recognize , . . that our nation is in trou­ suddenly and steeply behind in world markets will do for all ble, and am prepared to participate in actions necessary to of us what Sputnik did in the 1 950s and Pearl Harbor did in confront this issue and solve it. . , , the '40s, and we will use our inherent strengths of mind and We will welcome the participation of the administration will to respond to the challenge . . . .

ElK December 19, 1986 National 69 NationalNews

change America in the next few years, cre­ that the court should reconsider the deten­ ating dislocation unlike any event other than tion of three of the accused who are still in war." It also quotes Dr. Mervyn Silverman, custody. Robertson won't take who engaged in diatribes against Proposi­ Defense attorney William Moffitt also tion 64 and its most celebrated backer, Lyn­ brought to the court's attention the issue of any position on AIDs don LaRouche. He said that heterosexual ongoing leaks to the press from the govern­ After warning that AIDS could infect 46 transmission is now "a fact of life," contrary ment, contending that this was effecting the million Americans, presidential hopeful Pat to his position prior to the Prop. 64 vote. ability of his clients to get a fair trial. Judge Robertsonrefused to commit himself to any Meanwhile, the Roman Catholic Arch­ Keeton responded that it was not his practice specific steps to curb the disease's spread­ diocese of Los Angeles, another outspoken to "jawbone," but rather to enter orders and except for endorsing Surgeon-General C. opponent of containment of AIDS through enforce them, and that he would not say Everett Koop's recent report, and making testing and quarantine of AIDS victims, was more on this issue without a formal motion vague noises aboutprot ecting the V. S. blood forced to withdraw its supportfor an AIDS and a hearing. supply. education program, after it was disclosed Speaking for the government, Assistant Robertson indicated that, basically, he that the program espoused the use of con­ V.S. AttorneyJohn Markham said that the didn't want to be caught taking a position doms. The archdiocese-which is headed prosecution's case would take between six that might cause some to vote against him. by Archbishop Mahony, one of the rin­ weeks and two months to put in. "We've got Questioned by EJR about his position on gleaders of the anti-Prop. 64 crusade-is­ witnesses coming from overseas," Mark­ AIDS, Robertson delivered a a tough­ sued a statement assertingthat, "Contrary to ham added. Observers expect the entire trial sounding speech in which he declared that recent reports . . . the Roman Catholic to last at least three or four months. the AIDS virus "doesn't have civil rights." church does not approve the use of con­ But then, he lamented that "the public" isn't doms." yet ready to take the steps needed to stop AIDS. When EJR pressed him on what precise Mayors demand drug , steps he proposes, Robertson answered: "Well, I'd rather not say, because then I'd AIDS policy changes u.S. v. LaRouche be labeled as someone who was advocating A 28-point proposal was drafted by the V . S. them." trial date set mayors attending the League of Cities con­ A trial date of April 6 has been set in the ference in San Antonio, Texas. calls for a 'new national case of U.S. v. The LaRouche Campaign et The proposals the military to halt il­ al. At a hearing in Boston on Dec. 9, Federal urban policy, use of Judge Robert Keeton also set a Jan. 15 date legal drug-smuggling, and more federal money for research into the cause, treat­ 'Experts' say AIDS for defense motions to be filed, which will include motions to suppress evidence, and ment, and prevention of AIDS. cases will 'explode' dismiss the indictments on behalf of various The mayors urged Congress to renew funding for highways, public transporta­ An "explosion" in the number of AIDS cas­ of 10 indicted individuals and 5 organiza­ tion, clean water, and housing. It also asked es is expectedby 1991, says the Dec. 8 Los tions. federal help for cities in dealing with drug­ Angeles Times in a front-page lead article The case stems from a giant Oct. 6-7 abuse, homelessness, joblessness, and hun­ entitled "AIDS Shock Wave on V.S. Hori­ raid by 400 armed federal , state, and local ger. zon." The article quotes experts saying that police on the offices of associates of La­ "within five years, as the number of AIDS Rouche in Leesburg. It was the largest po­ cases explodes, many Americans who have lice raid in American history. beeninsulated from the burgeoning epidem­ Judge Keeton set June I as a "back-up" ic somehow will be touched by the disease." date for the trial to begin, in the event that It predicts that by 1991, AIDS could both sides cannot be readyby April 6. Reagan welfare cuts becomethe seventh leading cause of death. Defense attorney Odin Anderson said It quotes numerous opponents of Proposi­ that he believed that a June trial date was increase poverty tion 64 public health measures, who now more realistic, considering that the govern­ The decline of governmentprograms is ap­ admit-after the defeat of the referendum ment seized well over 400 cartons of mate­ parently responsible for a significant in­ in the November election-that this means rial in the raid, and considering the fact that crease in poverty among families with chil­ the death rate will soar. the governmenthas indicated that additional dren and does little to ease poverty, says a Rep. Henry Waxman, a Proposition 64 indictments are expected to behanded down report released by the Center on Budget and opponent, said that AIDS will "deeply on Monday, Dec. 15. Anderson also said Policy Priorities in early December.

70 National EIR December 19, 1986 Briefly

• REP. STEPHEN SOLARZ has been caught lying. Four Manhattan properties that Solarz insisted belong to former Philippines President Fer­ The report fo und that in 1979, nearly early pregnancies. It also said that teens dinand Marcos-indicating that one of every fivefam ilies with children who should not require parental consent before Marcos had "looted" the Philip­ would otherwise have been poor was able to receiving an abortion. Sex information pro­ pines-appearinstead to be theprop­ escape poverty with benefitsfrom SocialSe­ grams should "include information on meth­ erty of Saudi munitions dealer Adnan curity, unemployment insurance, or public ods of contraception , how to use them, and Khashoggi, according to documents assistance. However, in 1985, only one of how to obtain them. " introduced in court proceedings be­ every nine families with children was lifted The entireset of recommendations made gun by the Aquino government. out of poverty by those programs . the White House angry . President Reagan "Based on hard data from recent Census "strongly disapproves of giving contracep­ • JESSE JACKSON, lashing out reports, the analysis demonstrates that the tives to teenagers ," White House spokes­ at Japan for "insensitivity towardmi­ failure of most states to keep benefits up man Larry Speakes said. norities," threatened Dec. 9 to call for with inflation andthe budget reductionsmade Secretary of Education William Bennett boycotts against Japanese companies during the Reagan administration have been severely criticized the panel's encourage­ in the United States, unless they move a major factor in the increase in poverty ment of school-based birth control clinics, to withdraw from South Africa. He since 1979," Center Director Robert Green­ saying: "This is not the first time a presti­ warned Japan to end its "de facto in­ stein said on Dec. 7. gious-sounding group has advocated a dumb volvement" with the South African According to Greenstein, approximate­ policy-school-based birth control clinics government. Jackson spoke in To­ ly 458,000fewer families would have been that will damage our schools and our chil­ kyo, at the invitation of a Japanese poor in 1985, had support continued. In dren." minority group, the Burakumin, an 1979, the poverty rate was 11.7% and 26. 1 The director of the National Forum "untouchable" caste in the feudal era. million people were poor. In 1985, the pov­ Foundation in Washington, D.C., James erty rate was 14% and 33.1 million people Denton, said he was troubled by "the whole DR. MATHILDE were in poverty. valueless treatment of teenage promiscuity • KRIM, who The report stated: "The decline in the and abortion." opposed California's Proposition 64 anti-poverty impact of government benefits public health initiative on AIDS, has programs is even sharper when non-cash called for distributing clean needles to drugaddicts . programs are. included, primarily because the non-cash programs were amongthe pro­ • CORRECTION: Author Anton grams that were cut significantly." Chaitkin believes that Washington Nunn readies remake Post publisher Philip Graham was murdered, and that his widow Ka­ of Armed Services tharinebenefited from the murder, but Senator Sam Nunn (D-Ga.), the Trilateral has not charged Mrs. Graham with National Academy report Commission's pick to be next President of the murder, as erroneously reported the United States, is preparing to overhaul in this column last week. angers the President the Senate Armed Services Committee when The National Academy of Sciences, in a he becomes chairman in January. • PAUL GALLAGHER, execu­ report published Dec. 10, called for in­ Chief among the changes Nunn is plan­ tive director of the Fusion Energy creased access to contraception as the "sur­ ning is the creation of a tactical warfare sub­ Foundation (PEF), announced Dec. est strategy" for reducing the country's high committee, to deal with conventional war­ 4 that New York Attorney-General level of teen pregnancies. After a two-year fareissues . Sen. Carl Levin (D-Mich.), who RobertAbrams has droppedall claims study by a blue ribbon panel organized by consistently toes the KGB line on defense that the tax-exempt status of the Fu­ the Academy's National Research Council, issues, especially the sm, is in line to be­ sion Energy Foundation is now or had headed by Harvard Medical School's Prof. come the new subcommittee's chairman. been revoked. Abrams thereby Daniel Federman, the panel recommended Nunn is also expected to give the sea­ "amended" his complaint against the the contraceptivepill for women as the "saf­ powersubcommit tee to Sen. Ted Kennedy PEF, a complaint that is part of his est and most effective means of birth control (D-Mass.), in apparenttribute to Kennedy's legal witchhunt against organizations for sexually active teens." It also proposed navigational talents. associated with Democratic presi­ widespread distribution of condoms "in The orientation of the powerful Armed dential candidate Lyndon LaRouche. places where teenagers congregate" (e.g., Services Committee is expected to be fur­ The allegation firstsurfaced in a Sept. youth centers, gyms, and video arcades). ther influenced in Moscow's direction by 12 Associated Press wire story by The report called school-based clinics new member Sen. Albert Gore (D-Tenn.), Abrams's co-conspirator William that provide contraceptiveservices "a prom­ whose father sits on the board of Armand Welch. ising intervention" against unwanted and Hammer's Occidental Petroleum.

EIR December 19, 1986 National 71 Editorial

Time to dump AIFLD

On Dec . 12, the Colombian Supreme Court annulled of what remains of the CQlombian Workers Union the treaty of extradition of drug traffickers to the United (UTC)-now that a new, anti-mafia mass labor orga­ States, the centerpiece of Colombia's war on drugs. nization has been formed in its place. The court ruled unanimously that the law authorizing At this "convention," Victor Acosta ended up as the treaty was unconstitutional , on the technicality that president of the UTC , and Mario Valderrama as vice it had been signed by the acting President while the president. Valderrama had gone to Miami to defend the President was out of the country . jailed drug traffickerHeman Botero, who hid many of Did the government ofthe United States itself give his illicit activities behind the facade of a soccer pro­ the go-ahead for this catastrophic setback to the joint moter. Valderrama himself was until a short time ago i U.S.-Colombian war on drugs? the second-in-command of the Medelli'n Independent It is a fact that the U. S. Embassy in Bogota, and the football team, which Justi�e Minister Rodrigo Lara American Institute for Free Labor Development Bonilla, shortly before he was assassinated by the ma­ (AIFLD) , an institution officially funded by the U.S. fia,mentioned among the sportingenterpri ses linked to State Department, are the ones who bankroll the activ­ drugs. Now, after the violent death of the team's pres­ ities of Colombia's pro-drug trade unionists, who have ident, Valderrama has taken his place . In many political . been working to wreck that treaty . circles it is rumored that Valderrama is the link between These are the very same U.S. circles which are Victor Acosta and the drug trafficker Pablo Escobar. under scrutiny in the "Irangate" scandal , for trafficking Solidaridad lberoamericana, a newspaper which arms to the Iranian terrorists and using the money to has consistently exposed thesefa cts , has been receiving finance theContras . telephone threats. Its edit<;>r, Maximiliano Londono Since 1984, when the body of murdered Colombian Penilla, who is also vice-president of the National Anti­ Justice Minister Rodrigo Lara Bonilla was not yet cold Drug Coalition of Colombia, has earned the hatred of in its grave , these pro-drug trade unionists, led by such the mafia, which is defended by the pro-drug unionists individuals as Tulio Cuevas , Victor Acosta, and Alfon­ the U.S. embassy and AIFLD are so happy to fund . It so Vargas , put out a proclamation against the treaty . is obvious that if anything untoward happens to the From that moment on, they have not missed a chance editors of Solidaridad lberoamericana, it will be the to condemn it. These same pro-drug trade unionists responsibility of the people who are thus spending U. S. have traveled to various countries to intercede on behalf taxpayers' money. of imprisonedColombian drug traffickers , as when Al­ What will President Ronald Reagan do? Clearly one fonso Vargas , Tulio Cuevas, and Manuel Felipe Hur­ part of his government-the same implicated in the tado went to Spain to beg for mercy for the gangster "Irangate" scandal-financed the activities of individ­ Gilberto Rodriguez Orejuela. These same pro-drug uals who defend the drug mafia and fight against the unionists became involved in sordid banking deals collaboration of the nations of the Americas against , backed by the AIFLD, such as that of the Workers Bank drug trafficking. of Colombia, to help "launder" money from narcotics Will Ronald Reagan make good on his pledges of a trafficking. war on drugs? Or will he look the other way, as he did Throughout these activities, these characters have in the case of the mobster Ramon Mata Ballesteros, enjoyed the financial backing of the U.S. embassy in who, although he is considered the mastermind of the Bogota and AIFLD. It goes even further: Only a few murder of U.S. Drug Enforcement Administration agent days before the Supreme Court of Colombia took its Enrique Camarena, today walks around free in Hon­ decision on the extradition treaty , the U. S. embassy duras , with the protection of elements of that country's and AIFLD generously underwrote the "convention" government?

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